There are many ways to invest your money, from traditional options like stocks and mutual funds to more modern options like cryptocurrencies. Your age will probably play a big role in which investments you choose. Both younger and older generations have their own preferences for investment products.
The Motley Fool recently studied the investment habits of Gen Z and Millennials to find out which investments they prefer most. Here, we'll show you the results and how to choose the right investments for your portfolio.
5 investment products most popular with millennials
Here are the most popular investments among Millennials and the percentage of each investment they own.
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- stock: 55%
- Retirement account: 47%
- Cryptocurrency: 43%
- Mutual funds: 33%
- Bonds: 28%
Millennials are open to a variety of investments. Seven of the nine investment products had the highest ownership rates. That's probably in part because they started investing around the same time that zero-commission trading became the norm, giving people the opportunity to invest in anything at an affordable cost.
The stock market has historically grown at a rate of about 10% per year. Investing in stocks is a wise decision, whether you are an individual or an investment fund. To their credit, Millennials are most likely to invest in stocks. They are also most likely to invest in crypto assets, which are high-risk assets and are not a good place for all but a portion of their funds.
While some millennials may be investing more than they should in cryptocurrencies, the biggest problem is that only 47% have retirement accounts. These are essential as they help you save on taxes. If you don't have a 401(k) option, you can still open an Individual Retirement Account (IRA).
The 5 most popular investment products for Gen Z
Here are the most popular investments among Gen Z and the percentage they own each investment.
- stock: 37%
- Retirement account: 36%
- Mutual funds: 26%
- Cryptocurrency: twenty two%
- option: 18%
Many Gen Zers haven't started investing yet. That's understandable, since not a single one of them has reached the age of 30, but it's also a costly mistake. Even if you can't invest a lot of money as a young adult, it helps to invest in something. The younger you start investing, the longer it will take for your money to grow.
Gen Z is also the generation least likely to have a retirement account. Again, this is understandable. Most people probably don't have access to a workplace retirement plan yet. However, anyone who is working can open an IRA and begin making tax-deductible contributions. Another option is a Roth IRA, which allows for tax-free withdrawals in retirement (though contributions are not tax deductible).
Which investment products should you include in your portfolio?
All investors must have at least one retirement account. If your employer offers a 401(k), be sure to take advantage of it. An IRA is also a good option, whether or not he already has a 401(k). Retirement accounts come with early withdrawal penalties if you withdraw money before age 59 1/2, but the tax benefits make them still worth using.
You can also open a regular brokerage account to have access to your investments without early withdrawal penalties. But for most investors, it makes sense to set aside funds in a retirement account first for tax benefits.
When it comes to what to buy, stocks with growth potential are one of the best options. Note that you don't have to invest in stocks individually. Mutual funds and exchange-traded funds (ETFs) are also popular options. They invest in a large number of stocks for you, so you don't have to build the entire portfolio yourself.
Investing in bonds is a good idea because they are a stable fixed income investment. Some investors prefer to invest their money in real estate investment trusts (REITs) or cryptocurrencies. There's nothing wrong with having a diverse mix of assets, but stocks are usually the backbone of a strong investment portfolio.
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