Inside the minds of the next generation’s investors 

With endless investing resources online thanks to the advent of “finfluencers” and financial podcasts, the next generation of investors is becoming increasingly switched on. CMC Markets’ head of distribution, Kurt Mayell, drills down on where Gen Z are investing, what positions they’re taking, and what the future holds for this cohort.

Nividia, Meta, Apple: these are just some of the stocks that today’s young, technologically-savvy investors are buying, often with a long-term outlook. It’s part of a growing trend of young investors seeking lucrative opportunities outside of Australia, according to CMC Markets’ head of distribution, Kurt Mayell. 

“Unlike older Australian investors who might seek returns in mining or financial stocks, young investors aren’t limiting themselves to local trades,” Mayell says. “They’re gravitating towards these global AI-driven stocks, which are the hot new thing and are hard to ignore. To the young generation, the opportunity seems enormous.” 

And it is: research by PwC shows AI could contribute up to $15.7 trillion to the global economy in 2030, more than the current output of China and India combined. 

“The next generation sees this as the way forward in the world, and having stakes in companies like Nvidia and Meta means they’re part of something that will shape the world. There’s also a bit of FOMO going on here.” 

But there is a method to the madness: data shows that over the past 10 years,  a select group of top US technology companies have delivered an average annual return of more than 20%. However, Mayell admits this raises sustainability concerns (or bubble suspicions). 

“While it’s not the younger generation creating this bubble – big investors and overall market hype are driving it – if it pops, they’ll still feel the pain as many are invested in these high-growth stocks,” he says. 

Mayell says it’s worth noting that some of the recent upticks in valuations – like Nvidia’s valuation topping $3 trillion (though it is $2.84 trillion at the time of writing) – have been backed up by real earnings growth. 

According to CMC, Nvidia’s price-to-earnings ratio (P/E) (at the time of writing) was about 55, lower than during most of 2020 and 2021. The P/E ratios for Meta at 27 and Microsoft at 36 are pretty much around their average levels when you look back over the past five years. 

Young investors’ global outlook goes beyond individual stocks, too. Interestingly, many are now gravitating towards exchange-traded funds (ETFs) that target international markets. 

“The Vanguard MSCI Index International Shares ETF (VGS), iShares S&P 500 ETF (IVV), and Betashares Nasdaq 100 ETF (NDQ) are consistently among our top-traded and are particularly popular with younger investors,” Mayell says. 

But drilling deeper into the habits of next-generation traders, Mayell says their investment decisions stem from their information sources.  

According to CMC Markets’ latest data, around half of young investors and traders use YouTube, and a third use X (formerly Twitter) to help inform their trade decisions. Less than 1-in-10 young investors choose to consult traditional media sources when making trading calls. 

“X and Reddit, in particular, are two platforms that continue to grow in usage,” Mayell says. “They’re a good source of debate and new ideas, and they can make finance a bit more fun, which is part of the appeal. YouTube and podcasts are also great for breaking things down, and email newsletters can help to cut through the noise.” 

While exactly where the next generation are hanging out may be obvious, what’s interesting about the new breadth of trading information is how it’s changing investment trends. Namely, young investors are much more in tune with market trends and catch on to certain trades earlier than their older counterparts, thanks to tips from their favourite YouTubers or threads in group chats. 

“It’s brought the cost of information down to zero,” Mayell says. “Yes, there are risks in following these online voices, but more information from a wider range of sources means more investors are empowered to make their own decisions.” 

Mayell says young traders are about to enter a changing economic climate and a period of market volatility. Some central banks have begun cutting interest rates. While a lower interest rate environment could support markets and create opportunities, it also raises some red flags. 

“For young people, the challenges may not be financial markets, where the risk is losing money during downturns,” Mayell says. “It’s also about what’s happening outside the markets: economic hardships like unemployment, stagnating wages, and rising living costs, which could mean less money to invest and trade.” 

“Exponential innovation is a trend we’re seeing more young investors get fired up about.”

Kurt Mayell

The good news is that younger investors, given their typically longer investment horizon, can often take on more risk, as they have more time to recover from market fluctuations compared with older investors who may prioritise protecting their savings. 

In terms of trades, based on CMC’s market data, AI will continue to drive investment decisions as companies seek more use cases for the technology. 

“Take robotics: AI is what’s making these machines more sophisticated. And when you look at genome sequencing, AI drives those improvements.” 

Mayell notes AI won’t be the last tech trend to influence investment decisions. Robotics, space exploration, bio-technology, and quantum computing are also emerging trends on the horizon. 

The bottom line: a wave of change is coming, and young investors are ready to face it head-on. 

For more information about ALPHA, head to www.cmcmarkets.com/en-au 

Seek independent advice and consider the relevant Terms and Conditions at www.cmcmarkets.com/en-au when deciding whether to invest in CMC Markets products. CMC Markets Stockbroking Limited (ABN 69 081 002 851 AFSL No. 246381).