What do millennials and Gen Z want?

As investors, consumers and workers, youth here and abroad have been said to turn up their noses at opportunities. On the other hand, some say they are just trying to get by as the cost of living rises.

In a world where both extremes ring true, brokerages, retailers and employers wonder: What do millennials and Gen Z want?

Reckless investors?

In less than 10 days, 22-year-old Mihir Malhotra more than tripled his $100,000 principal using Phillip Nova’s MT5 trading platform.

See also: 22-year-old triples $100,000 principal in nine days, wins Phillip Nova challenge

Mihir made one final swap on Sept 27, turning in $322,652 worth of virtual credits for a $1,000 cash prize at the close of the Phillip Nova Young Investors Trading Challenge 2022.

The final-year business undergraduate at the Singapore Management University only entered the markets in May.

See also: Futures and options for young retail investors beyond plain stocks

He says: “I guess I started so late because I wasn’t confident enough. It’s a game of confidence.”

Although participants were allowed to trade foreign exchange (FX) and contract for differences (CFD), Mihir only traded Brent crude CFDs.

He based his trading decisions on weekly reports issued by the US Energy Information Administration (EIA). He also encountered one Opec+ meeting on Sept 5, where the body announced the first oil production cut in over a year.

Having traded virtual credits, Mihir admits that he “definitely took a lot of risky trades”. He adds: “But I wouldn’t keep a position open for a day; I took my positions very quickly because they were all based on macro events.”

Are young, savvy investors like Mihir the exception or the norm in Singapore?

One brokerage found that Gen Z investors are the most conservative and risk-averse among their customers, while Gen X are the biggest risk-takers.

According to a whitepaper by digital brokerage and wealth management platform Moomoo Financial Singapore, Gen X were the greatest risk-seekers throughout the “extreme volatility” seen in 1H2022.

See also: Cost and convenience hinder sustainable living, baby boomers greener than Gen Z: OCBC Climate Index

According to Moomoo’s statistics, Gen X investors, or those born in or before 1980, stuck to their guns most fervently among the three generations surveyed.

Gen X investing patterns only slightly changed in 1H2022, says Moomoo, with only a 2.8 percentage-point decrease in stock investment value to 89.4% as of June 15 from Dec 31, 2021.

Conversely, Gen Z, or those born in or after 1997, were the most risk-averse investors, and their equities investments “significantly declined” from 85.3% to 76.7% over the same period.

Instead, Gen Z turned to defensive plays like funds and bonds. In aggregate, Gen Z investors allocated 14.9% and 7.7% of their positions to funds and bonds respectively, the highest among the three generations surveyed, which also includes Gen Y, or those born between 1981 and 1996.

Meanwhile, Gen X investors had only 8.4% and 1.8% of their positions in funds and bonds respectively — the lowest among the three generations.

“Millennials get a bad rap, often being cited as not being financially responsible by favouring frivolous spending over saving,” says Dave Goodsell, executive director of French corporate and investment bank Natixis’ Centre for Investor Insight.

Millennials have high expectations, adds Goodsell. “But they also are proactive when it comes to financial planning and are no longer the young 20-somethings they’re often thought to be.”

Natixis Investment Managers launched in May its Five Financial Truths about Millennials at 40 report, as the first of the millennial generation reaches 40 years old and enters their peak earning years.

The global survey of nearly 2,500 individual investors between the ages of 25 and 40, with minimum investable assets of US$100,000 ($137,224), found that millennials are “diligent savers”, setting aside an average of 17% of their income for retirement.

That said, 72% of millennials see inflation as one of the biggest risks to their retirement security.

While 70% of millennials are confident they can retire with financial security, 66% say they accept that they may need to keep working longer than anticipated, according to Natixis.

They have accumulated “considerable wealth” so far, adds Natixis, as 31% of millennials attribute their savings to business ownership or self-employment income and 37% say their net worth comes from investing. Just 17% cite an inheritance or family money as a source of their wealth.

As novice investors, two-thirds (66%) of Natixis’ respondents say they are comfortable taking risks to get ahead, while 72% say they choose investment safety over performance.

“While it’s good to have a healthy respect for risk, many millennials are genuinely conflicted between risk and their return expectations,” says Goodsell.

US tech fans?

Brokerages here report similar interest among their users for US companies. Since its launch in February 2020, Tiger Brokers (Singapore) has targeted young retail investors. Gen Z investors, or those born between 1996 and 2010, account for 28% of the digital brokerage’s customer base.

According to Tiger Brokers, trading volume has been surging among its users, particularly for US securities. So strong is this appetite for US names that the annual growth rate stands at 250% over the past two years.

Based on data from its Tiger Trade platform as of May, the average daily trading value of US securities amounts to some US$102 million.

Some 87% of users on Tiger Brokers are invested in US securities, and CEO Eng Thiam Choon notes an increased interest in US markets amid global volatility.

Traders opted for large-cap names following the outbreak of the Russian-Ukraine war, says Eng. “[We saw] a surge in the sale of US equities on our Tiger Brokers (Singapore) platform in March amid heightened market volatility. However, we also saw an increase in the purchase of quality US companies in the equities space. It seems that investors are moving their funds away from riskier companies to blue-chip companies.”

Wilfred Lim, head of investment solutions at PhillipCapital, says young investors tend to stick with names and markets they are familiar with, but also buy into tips they encounter online.

“In the past two years, about 60% of our clients below 30 years old traded Singapore equities, and 23% traded US equities. We saw that young investors traded in these geographies and asset classes due to familiarity, simplicity, as well as the buzz generated through social media,” says Lim.

These range from Singapore banks to largecap US tech companies, such as FAANG — Facebook/Meta, Amazon, Apple, Netflix and Google/Alphabet.

Financial influencers also hold sway by covering household names, such as Tesla, Twitter (now delisted after a US$44 billion buy-out by Elon Musk, Tesla’s CEO) and AMC Entertainment.

For novice investors, owning a stock is an easier concept to understand, says Lim, compared to buying a fund, where an investor would need to understand the portfolio allocation, investment strategy and various layers of fees.

One 28-year-old, who is a financial industry professional, started investing as an undergraduate with the goal of achieving financial independence.

Over the years, he has learned about the different factors that would move stocks and even picked up technical analysis online.

He is excited by the ebbs and flows of the markets, and spends most of his time keeping up with the latest market-moving news through updates on Twitter and Telegram groups, along with financial news outlets and the Singapore Exchange (SGX) website.

US names are more varied and allow for better expression of one’s views, he says.

They’re more relatable to our daily lives, and the equities and derivatives markets are larger and more volatile, which provides for more opportunities and capital appreciation.

His favourite counters in the US include Apple, Nvidia, Advanced Micro Devices, Freeport-McMoRan and the Dow Jones Industrial Average ETF.

The SGX, meanwhile, is home to dividend plays and REITs, he adds. “Singapore is dominated by REITs; they’re stable with high dividend yield and less volatility.”

His favourite local names include CapitaLand Integrated Commercial Trust, ESR-Logos REIT, Keppel Infrastructure Trust and Frasers Logistics & Commercial Trust.

Natixis’ Goodsell points to the 8.19% average annual return the S&P 500 delivered over the 20 years until 2020, which has increased expectations. “However, there’s also more market volatility so investors need to plan accordingly and assess their risk appetite.”

Millennials have enjoyed a long bull market with low interest rates and little inflation for much of their adult lives, he argues. “They also experienced 9/11, the first tech bubble burst and a severe financial crisis that crushed many in their parents’ generation. They’ve known what loss looks like and want to protect their interests as they see risks rise and their finances grow more complex.”

Delusional crypto heads?

Within the beleaguered realm of cryptocurrency, however, young investors may exhibit more risk-taking behaviour.

According to the Oversea-Chinese Banking Corp’s (OCBC) Financial Wellness Index 2022, among the respondents below 30, about one in six (14%) are invested in high-risk, high-return products, while 18% are invested in crypto.

On average, respondents below 30 lost about 40% of their crypto investments. Despite this, two in five from this age group still plan to invest in crypto.

The findings, published on Nov 22, were based on a survey of 2,182 working adults between 21 and 65 years old, done in August.

Singaporeans in their 30s, meanwhile, have a similar appetite for risk, according to OCBC, with 12% invested in high-risk, high-return products, and 14% invested in crypto.

In comparison, 8% of respondents aged between 40 and 54 held money in crypto, while 4% of respondents aged 55 and above indicated that they were invested in cryptocurrencies.

Exposure to riskier assets has weighed on young investors’ portfolios, says OCBC. About 42% of investors in their 20s saw a net loss on their investments, up from 2021’s 19%; while 35% of investors in their 30s made an overall loss, up from 2021’s 10%.

Those in their 20s had the lowest average rate of investment returns (0.3%) compared to investors in their 30s (0.9%), Gen X (0.7%) and baby boomers (1.1%).

One 27-year-old started dabbling in crypto in 2017 after hearing about it from his friends. Initially, his friends were interested in stocks and ETFs, but they began hearing about a new asset class with “substantial gains”.

“After reading deeper about blockchain technology, we realised how early we were. The first step was using Gemini as an exchange to convert fiat into Ethereum and Bitcoin. After that, it was based on trial and error to swap for the cryptocurrencies that I wanted,” he tells The Edge Singapore.

With $20,000 in initial capital, he also moved into lesser-known coins like Quant and Chainlink. “Most of the transactions occurred on decentralised exchanges, such as Idex and Uniswap, as exchanges like Binance had just started,” he recalls.

Binance, now the largest exchange in the world by daily trading volume, was only founded in July 2017. In 2021, he left a Big Four accounting firm to focus on crypto trading. “Twitter is the main platform I used to source for crypto information. Telegram groups help to clarify potential doubts.”

Having seen the rise and fall of crypto, will he ever invest in stocks and ETFs again? “Yes, but not now. Traditional products are regulated and less volatile. I will be using them to retain wealth and generate passive income.”

After being exposed to crypto, the risk-reward ratio for traditional products is too little.

Young Singaporeans’ worries about retirement may be the reason for this risk-taking behaviour, says OCBC.

On average, Gen Z and millennials in their 20s and 30s aspire to retire at 58 — a decade before Singapore’s official re-employment age of 68.

In addition, they wish to retire in style. When offered three retirement lifestyles, more respondents in their 20s (34%) and 30s (28%) picked the most luxurious lifestyle, compared to Gen X (21%) and baby boomers (22%).

Similar to Natixis’ findings, Singaporean Gen Z and millennials are concerned about whether they can achieve these goals. Despite being relatively far from retirement, 62% of those in their 20s and 56% of those in their 30s worry that they will not have enough retirement funds.

OCBC’s head of wealth management Tan Siew Lee says 2022 was “probably one of the toughest” years in decades. “Add to this economic uncertainty, rising interest rates and a market downturn, we truly are experiencing a year with ‘no place to hide’.”

Young Singaporeans are especially concerned about their finances — but I do not think that the future is bleak… In their hurry to grow their retirement funds, some may be tempted to speculate for quick gains. Young Singaporeans need to look longer term, seek professional advice and always do their research before investing.

Tree-huggers?

Moving away from asset classes, what are the preferred investment theses of young investors?

European asset manager Amundi notes there is a “generational shift” in attitudes towards environmental, social and corporate governance (ESG) investing. This comes after the company surveyed more than 1,000 participants in Singapore aged 21 and above who earn at least $5,000 each month.

Gen Z, or those aged 24 and below (82%), and young millennials, or those aged 25 to 34 (72%), were more interested in ESG investing than the average respondent aged 21 and above (69%). Gen Z (79%) and young millennials (68%) also believe it is more important now compared to pre-pandemic times.

According to Amundi, Gen Z are “especially sensitive” to social causes like poverty while young millennials feel strongly about inequality and discrimination.

Meanwhile, Gen X and baby boomers, or those aged 45 and above, view water and natural resources as a more pressing issue.

However, Amundi points to a “say-do gap” between Singaporean investors’ beliefs and their actions. A clear majority described ESG investing as a priority (61%) and of higher interest today than before Covid-19 (69%).

Yet, when it came to voting with their wallets, investors are only willing to allocate one-third (about 34%) of their portfolios into ESG investments, and just four in 10 investors actually increased their ESG investment activity following the pandemic.

According to Amundi, retail investors in Singapore still see investing as primarily used to grow one’s savings (70%), and only 8% of respondents believe it can drive environmental and social change.

“With results indicating a mismatch between the perceived importance of ESG investing to catalyse environmental and social change and of its ability to provide value for investors, more can be done to spark concrete action,” says Albert Tse, CEO, South Asia, at Amundi.

The majority of Singaporeans are still not embracing sustainability, says OCBC Bank, and the few who do are motivated by personal practical benefits and not for the environment.

Released in August, the second OCBC Climate Index survey drew responses from more than 2,100 Singaporeans. The index outlines four lifestyle themes that represent urban living, weighted based on how they impact an individual’s carbon footprint — transport (45%), home (25%), food (15%) and goods (15%).

Surprisingly, Gen Z respondents scored the lowest in three of the four categories. Their score was only buoyed by less frequent air travel and greater public transport ridership, as they are less likely to drive.

Conversely, baby boomers — or respondents aged 58 to 65 — scored the best among the survey’s age groups. OCBC attributes this to the fact that this age group is less busy and can afford the time to walk, cycle or take public transport.

According to the survey, younger Singaporeans are motivated most by better health (56%), while barriers to adoption are cost (53%) and inconvenience (53%).

More Singaporeans want to create a more sustainable world but find it difficult to make the real change when it is expensive or not convenient, says OCBC’s Koh Ching Ching, head of group brand and communications.

When cost is less of a concern, however, young, affluent Singaporeans are among the world’s most sustainable travellers — or at least, they want to be.

According to international research firm YouGov, over four in 10 (42%) Gen Z travellers in Singapore, aged 18 to 24, would search for sustainable travel offers for their next vacation.

They are the second-most likely globally to hunt for such sustainable travel offers, behind their peers in Mexico and ahead of those in Indonesia. YouGov’s Travel and Tourism Report 2022: Youth of Today, Travel of Tomorrow report features close to 26,000 responses from across 25 countries.

Globally, almost four in 10 of Gen Z would consider staying in an eco-friendly or green accommodation on their next vacation (38%) compared to a third of global over-25s (33%).

Meanwhile, just over a fifth are looking for ways to offset their carbon footprint from their vacation and prioritise booking a flight with lower CO2 emissions.

Money no enough?

But not all members of Gen Z are old enough to earn an income. The Youth in the Digital Space study by the Singapore University of Social Sciences and insurer Great Eastern found that only a quarter of some 2,500 respondents are working full-time.

“A large number of 16- to 19-year-olds are still receiving an allowance and have a substantial amount of additional expenditure covered for by their parents or guardians,” says the report. “On the other hand, older respondents, especially those in or approaching their mid-20s, are either working or in university, where the time spent at home is significantly less, and their salaries or allowances are directed at covering a wider range of expenses.”

Two in 10 respondents living in private properties think their monthly income or allowance is insufficient. This proportion is higher among those living in public housing.

From a sample size of 657 youth, a quarter (25.1%) believe they need between $500 and $999 a month to meet their spending needs.

Among the wider pool of 2,500 respondents, Gen Z’s dearest purchases ranged from electronic gadgets (40.4%) to clothes (22.5%), entertainment (12.0%) and luxury goods (4.5%). Other notable purchases include food, beauty products, sports equipment and gym memberships.

For this group of young Singaporeans, big-ticket purchases remain aspirational milestones for now. The most common milestone set by respondents was the purchase of their first house, with more than 50% who had set an age to accomplish it wanting to do so before their 30s.

Notably, one-fifth of the respondents between the ages of 16 and 19 indicated interest in starting a business before the age of 25. However, the nature of these potential ventures was not defined by the researchers.

The report’s authors note a trend of young business-owners. “Through social media, young people can reach out to like-minded individuals with similar interests to learn from one another. Another reason could be due to the lower barrier of entry, as online business facilitates and allows for a low setup cost, thus allowing young people with limited funds to start their own businesses with good marketing and strong technical skills.”

Quiet quitters?

Millennials and Gen Z will make up over 70% of the global workforce by 2025. Before they become their own bosses, how do young Singaporeans fare as employees?

US jobs listing site Indeed says that more than half of Gen Z workers (55%) in Singapore are “quiet quitting” — a recent buzzword describing employees who do the bare minimum to complete their tasks.

Indeed surveyed 1,000 employees in Singapore over a week in October and half of them were Gen Z respondents.

According to Indeed’s report, salary dissatisfaction and burnout are the top reasons cited by workers for “quiet quitting”. Other reasons mentioned include lack of career progression and lack of support from management.

Workers between 16 and 25 years old, or Gen Z, are least interested in money when choosing a job. Just 50% of those in this age bracket say salary is the most critical reason when accepting a position, compared to 61% of millennials and 70% of Gen X.

Instead, Gen Z workers prioritise flexibility (45%) and career progression (43%) when considering a job offer.

Some of Indeed’s findings reflect just how new Gen Z are to the workforce. For example, they find it more important to work with friends and people they already know; this is a critical aspect of choosing a job for 15% of those under 25. In contrast, only 9% of Gen X and 5% of baby boomers feel the same.

With their relative inexperience, Gen Z may have also faced rejection more often than workers in other age groups. Some 64% of those under 25 have experienced or have ghosted recruiters during a hiring process. This figure drops to 59% for millennials and 41% for Gen X.

Gen Z workers bring with them a unique set of preferences and priorities, says HR speaker Rachele Focardi. “With four generations working together, organisations are experiencing the ‘XYZ Divide Syndrome’, where generational diversity is often seen as making the workplace less productive,” she notes.

However, Covid-19 acted as a great equaliser, she adds, providing an unexpected and unprecedented scenario: one where every employee lived the same experience at the same time.

Baby boomers, Gen X, millennials and Gen Z are now “completely aligned” in envisioning hybrid arrangements as the future of work, says Focardi. “They also believe for the first time that in today’s workplace older and younger generations face similar challenges and opportunities.”

They want to feel valued, recognised, appreciated and ‘seen’ — not only by their employer but by one another.

Are we that different after all? Public relations firm SPAG says millennials share a common trait with baby boomers — both generations value teamwork.

Similarly, Gen Z workers take after their Gen X counterparts in being adaptable and open to change.

Launched in partnership with HR consultancy Great Place to Work, public relations association PRCA SEA and HR news site Chief of Staff Asia, SPAG’s Engaging Multigenerational Workforce in the Era of Transformation report found that 61% of millennials and Gen Z face challenges working in a multi-generational environment, but 70% believe that Covid-19 has served as a catalyst for transforming workplaces for the better.

While millennials and Gen Z want more open channels of communication to resolve differences in communication styles and attitudes, baby boomers and Gen X may not be accustomed to this type of environment, says SPAG.

However, the older workers do recognise the value of having different communication styles and are increasingly receptive towards it.

“It took us a global health crisis to understand that there are indeed distinct generational differences in how employees perceive changes, but not necessarily in the way that could have been imagined,” says Priyanka Bajpai, senior partner at SPAG. “Organisations must provide both infrastructure and a culture that encourages employees to use emerging technologies without losing information or a sense of belonging.”

Infographics: Futu, OCBC, Singapore University of Social Sciences, Great Eastern