Forget houses: How young Aussies are taking on the generational wealth gap
Priced out of the housing market, gen z are turning to stocks instead.
The next generation of stock investors is here, not out of enthusiasm but simple necessity.
Amidst skyrocketing property prices and the added pressures of inflation and slow wage growth, the younger generations are trying their hand at the stock market in an attempt to bridge the generational wealth gap.
According to data from Stake's 2024 Ambition Report, which tracks the sentiments of investors, 74% of 18-34 year old investors believe the wealth divide is holding back young people.
If financial prosperity is a game of poker, the younger generations are playing with a dud hand.
But there's an additional sense of fatalism that is seeing them give up on more traditional avenues to wealth - successful careers and expensive houses.
More than 50% of 18-34 year old investors now think the assets you own are more important to building wealth than how hard you work, compared to only 30% of those aged 55 and over.
As a result, young Australians are prioritising investing in the stock market. According to Stake data, 59% of 18-34 year olds see the stock market as a more accessible way to build wealth, compared to 11% who favour property.
"In an economy where costs continue to outpace wage growth, Australians are looking for more accessible and reliable ways to reach financial security," says Samy Sriram, market analyst at Stake. As more people realise the need to proactively grow their wealth to reach their financial goals, we'll continue to see people engaging with financial markets."
"Despite the cost of living crisis we've seen in Australia, 73% [of existing investors] continued to invest over the past six months, and more than two-thirds (67%) retained all their shares over the past year."
And it's the youngest generations that are most likely to have kept investing, with 85% of 18-24 year olds adding to their portfolios over the last 6 months. Recent Finder survey data backs this up, with gen z and millennials the 2 generations most likely to continue investing in 2024.
The same generational trend is true of non-investors as well.
Finder data suggests 14% of gen z plan on investing for the first time in 2024. That's 7 times the rate of baby boomers, 3 times the rate of gen x and even double the rate of millennials.
So where are they looking to invest?
A recently published list of the most bought stocks on Stake shows Australian investors are moving towards US stocks and ETFs (exchange-traded funds) over homegrown investments.
"Over the long term, it seems that retail investors could become increasingly attracted to the US, due to the unrivalled number of opportunities with global consumer brands," said Sriram.
"US-listed ETFs can often have lower fees than their counterparts on the ASX, which can be another reason to invest directly through the US market."
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