The (Understandable) Schizophrenia of the Young Investor

This newsletter is part of The Assetizer, GenTwo's thought leadership platform.

While doing the research for the upcoming revision of our Assetization book, I have been diving into the literature on changing investor behavior. This includes among younger generations, in particular Millenials and GenZ. (Disclaimer: your author is neither, by a wide margin).

The picture that I am getting is surprisingly complex. 
 

On the one hand, these cohorts come over as a highly virtuous - or virtue signalling - group, dedicated to building a better world through sustainable investing. On the other, a fairly risk-taking group with a tendency to what Demitri Kofinas calls "financial nihilism" - investing based on cashing in on hype rather than fundamentals.
 

These seem contradictory. Even hypocritical. But dig deeper and this behavior turns out to be more nuanced. 
 

For wealth managers, understanding these young cohorts – and don't forget they are destined to be the beneficiaries of the largest wealth transfer in history – is a key part of understanding where the industry is likely heading.
 

Here’s some food for thought. (I have listed some sources at the end of the post).
 

Dr. Jekyll: The virtuous investor
 

Survey after survey shows that millennials and Gen Z want to invest sustainably, for example in climate or clean energy-related themes. Morgan Stanley reports that 99% of millennials and 97% of Gen Z globally say they are interested in these types of investment. That's basically unanimous.

They also report fairly high levels of allocations to such investments already, and say they plan to increase these in future. Many say that having such investments on offer would be a criteria for choosing a financial advisor. (They also say they would choose their employer based on its sustainability record.)
 

That's fairly strong data on the surface of it. And on the surface of it you might imagine these are people with a strong sense of duty and a long-term view.

Mr. Hyde: The daredevil speculator
 

Yet there is a flip side to this.
 

While they want to fight climate change, they also invest heavily in crypto. That includes plenty of Bitcoin - the asset that uses more energy than Argentina.
 

While they want to save the world for posterity, they are far more cavalier with themselves. According to one survey nearly half of Gen Z investors report being willing to take substantial or above-average financial risks to achieve their financial goals.

In fact, they like to gamble generally. This shows up in their portfolios, which are riddled with meme stocks and bets on individual equities (as opposed to boring old allocations). It also shows up in their overall behavior. According to one study, Gen Z investors are more likely to engage in online or other gambling than their non-investing peers by 2:1.

They are also prone to ignoring fundamentals and following fads, or at least that's how I interpret studies showing large numbers of younger investors admitting to be driven by FOMO. This is reflected in, and likely driven by, their heavy reliance on social media finfluencers, making them more susceptible to viral trends and hype cycles, and relative distrust of traditional financial advisors.
 

Split personality or rational response to a topsy turvy world?
 

So what's going on here?  My reading of the sources so far makes me think there are a lot of good, even rational, reasons for this seeming hypocrisy. Among them:

• Uncertainty about the future. A lot of them, even the wealthier ones, are uncertain about their financial future. When the future feels unstable, moonshots become rational hedges.
• Willingness to do it differently. According to the surveys, many of the young investors consider themselves more savvy as investors than their elders. Whether or not this is true - and it very well might be - this tells me that they have a low barrier to doing things differently. They are certainly not bound by tradition.
• Motivated by profit after all. A lot of them say that their interest in sustainable investing stems from a conviction that these tend to offer better returns. So yes, they want to do good. But they also want to do well. That’s an important data point. (See my podcast with Professor Lisa Wilson for an object lesson in how to build clean energy products with this in mind.)
• Lack of satisfactory options. They complain that they don't put more into sustainable investing because there aren't enough satisfactory options. They worry about greenwashing or the quality of the products on offer - which disqualifies many products or makes them distrust them. This is legitimate.
• Digital-first mindset. They are used to a different way of doing things. Everything online, everything immediate, everything self-driven. Crypto and DeFi provide this kind of experience. Social media and investing apps as well. (Myriam Deblanc talks about this extensively on the podcast as well.) I wonder sometimes if their behavior isn't driven to an extent simply by what's available online in a format they trust.
• Freedom to take risks. Many are waiting longer to start families, so they don't have financial dependents. This gives them more freedom to take risks, to experiment, to do things for the heck of it. This has given rise to what I understand is termed a YOLO - you only live once - attitude.

A final thought: perhaps their personalities seem split because they're hedging different futures. 

Sustainable investing is the bet that the system can be fixed from within. Crypto is the bet that it can't. 
 

Seems rational to me.

Reading:

• Morgan Stanley — Sustainable Signals: Individual Investors (2025)
• CFA Institute / FINRA — Gen Z and Investing: Social Media, Crypto, FOMO, and Family
• CFA Institute — The Finfluencer Appeal: Investing in the Age of Social Media
• EY — New EY report: digital assets and wealth / confidence
   

Tom Lyons, GenTwo