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Every generation has unique tastes that define and symbolize that generation’s culture. In most cases, the newest generation’s tastes are markedly different from the previous one. Accordingly, Gen Z is now making a radical break from previous generations regarding investments. Whereas their predecessors valued traditional offerings like stocks and bonds, Gen Z is banking on alternatives like art and rare sneakers. Benzinga looks at the reasons behind the shift.
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The trend was revealed in Bank of America’s 2024 Study of the Wealthiest Americans, which showed that Gen Zers with a net worth above $3 million were three times as likely as older generations to invest in alternative offerings. These days, there is no shortage of alternative options and the new generation has taken a liking to them. Specifically, they seem to have embraced cryptocurrency, cars, art and even rare tennis shoes.
83% of the study participants aged 21-43 reported owning or having an interest in owning art, nearly double the 40% response rate of the remaining wealthy survey participants. Drew Watson, Bank of America’s Head of Art Services, told Bloomberg Magazine, “They’re (young people) investing in blue chip art. The fastest-growing segment of the art market is still post-World War II and contemporary art.”
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Art can certainly be a lucrative investment. It’s not uncommon for works by masters like Rembrandt, Leonardo da Vinci and Picasso to fetch eight- and nine-figure auction prices. According to Artnews.com, the most expensive painting ever sold is Leonardo da Vinci’s Salvator Mundi, which sold for $450 million in 2017. There is an undeniable allure that goes with inviting your friends over to see your fine art, rare shoes or classic car collection.
Cryptocurrency has also proven an incredibly popular and lucrative investment with Gen Z, Millennials and even some Gen Xers. Bitcoin’s price is around $98,000 and many speculate it could shoot even higher during the upcoming Trump administration. You made a massive profit if you bought Bitcoin at its inception or even when it plummeted to $21,000 after hitting $68,000 during the pandemic.
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Despite that profit potential, cryptocurrency is much less popular with older, more traditional investors like Warren Buffett. This exemplifies the generational gap in terms of investment philosophy between Gen Z and their grandparents (or great-grandparents, in some cases). However, things like “allure” and “cool factor” are less important than long-term profitability when investing.
This begs the question of whether Gen Z’s alternative investment strategy will work. Cryptocurrency is notoriously volatile and trades in a largely unregulated environment where currency exchanges like FTX can crumble without notice. To be certain, stocks and traditional investments carry risk, but the slow, steady growth of the S&P 500 or a well-diversified portfolio of dividend stocks has helped scores of investors become millionaires over the last several decades.
This is all part of the magic of investing. Regardless of age, today’s investors have more options than ever in the traditional and alternative investment sectors. Theoretically, that makes diversification easier, but there is such a thing as having too much choice. No matter what generation you are in, basing your investment strategy on market fundamentals and executing it will always be the key to long-term success.
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Real estate is a great way to diversify your portfolio and earn high returns, but it can also be a big hassle. Luckily, there are other ways to tap into the power of real estate without owning property. Arrived Home’s Private Credit Fund’s has historically paid an annualized dividend yield of 8.1%*, which provides access to a pool of short-term loans backed by residential real estate. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
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This article Why Gen Z Is Banking On Alternative Investments Like Sneakers And Art Instead Of Stocks And Bonds originally appeared on Benzinga.com
