Higher interest rates and inflation led nearly 9 in 10 young investors to be active in the stock market this year, according to a Bankrate survey.
If the status of the economy has you thinking about making moves in the stock market, this is what you should know:
Interest rate and CPI hikes
The Federal Reserve has raised the federal funds rate — which is how much banks charge each other to borrow or lend money, according to Investopedia — 11 times since March 2022 in its efforts to bring inflation down to 2%.
What did the survey find?
Of Gen Z investors, ages 18 to 26, 87% were buying, selling or withholding additional investments in 2023 compared to 68% or nearly 7 in 10 millennials, ages 27 to 42. For Gen X investors, ages 43 to 58, it was 38% and for baby boomers, ages 59 to 77, 35%. The average among all American investors, including anyone with stock or a related account such as a 401(k), was 52%.
In other words: Gen Z investments were more volatile overall, which can be problematic in long-term financial growth.
“If younger investors trade in and out of the market, that’s almost guaranteed to underperform,” James Royal, a Bankrate analyst, told CNBC.
Young investors were also more likely to buy stock instead of dropping out of the stock market. Those additional investments could be beneficial for young investors, according to Bankrate.
“Despite a bias toward action rather than inaction on the stock investing front, both Gen Z and millennial investors indicate a much higher intent to increase their stock investments this year,” Greg McBride, Bankrate’s chief financial analyst, said.
Bankrate surveyed 3,676 adults — 1,665 had investment or retirement accounts.
What can you do?
It’s about playing the long game. Passive investing, a long-term wealth-building strategy, is when you buy a diversified index fund and hang onto it, according to NerdWallet. It’s different from active investing, where you try to time and beat the market.
While the market can be volatile, holding onto the investment allows you to earn a long-term return, according to Bankrate.
Plus, if you’re getting in and out of the market, you could have a bigger tax bill and miss the market’s biggest days.
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https://www.sacbee.com/news/business/personal-finance/article278798519.html Gen Z investors are more active in stock market, survey says