Young Investors Embrace High-Risk Strategies
When Jacob Kaplan contemplates his journey towards financial stability, he recognizes the importance of taking significant risks. For several years, Kaplan has engaged in betting on high-profile sporting events through online platforms, often dedicating around 30 hours each week to this pursuit. At 25 years old, he frequently exchanges insights with fellow bettors on Discord and even invested in a subscription to Bookie Beats, a sports data service designed to enhance his betting prowess. “Each bet carries its own risk,” Kaplan shared with CNBC. “However, by surrounding myself with knowledgeable individuals and honing my skills, I believe I can tackle the financial security challenges my generation faces.”
A Shift Away from Traditional Investments
Kaplan represents a growing segment of young investors who are moving away from conventional investment methods in favor of riskier options. This trend arises from a widespread sense of despair regarding the economy, characterized by soaring housing costs, escalating loan debts, and a contracting job market. This mindset has been labeled “financial nihilism,” which helps illuminate the increasing popularity of speculative assets such as meme stocks, leveraged exchange-traded funds (ETFs), and cryptocurrencies. Additionally, there is a notable surge in interest surrounding platforms dedicated to sports betting and prediction markets. “I see this as a logical reaction from young investors who aspire to meet specific financial objectives through their investments,” remarked Simon Oh, an assistant professor at Columbia Business School. He noted that achieving financial goals through traditional wealth-building methods has become significantly more challenging compared to previous generations. Consequently, it seems rational for them to pursue higher-risk options.
Emergence of Alternative Investment Platforms
A variety of risk-oriented trades have gained traction since the onset of the pandemic over five years ago. Beyond conventional markets, platforms for sports betting and prediction markets allow individuals to wager on a wide array of outcomes, from the latest NFL matchups to whether pop star Justin Bieber will announce a new tour. Additionally, trading digital currencies—including Bitcoin and various meme coins—has gained prominence. According to a recent survey by U.S. Bank, Generation Z is the most inclined to express interest in or plans to invest in cryptocurrencies over the next five years. Within the stock market, the phenomenon of short-squeeze stocks, which began with GameStop and AMC during the pandemic, has evolved. This year has seen the emergence of new meme stocks like OpenDoor and Kohl’s, with OpenDoor shares nearly tripling in value and Kohl’s stock doubling in just three months.
Growing Interest in Leveraged Investments
Creators of investment funds have sought to capitalize on this trend by launching leveraged ETFs, which amplify potential returns or losses on investments. Data from VettaFi and Bloomberg indicates that the number of leveraged ETF launches in 2024 has reached levels not seen in over 15 years. Options trading, another avenue for high-risk investment, allows traders to speculate on the future movement of securities. The Options Clearing Corporation reported that the total volume of contracts surpassed 1.2 billion in August alone, marking an 18% increase from the same month the previous year. Marketing consultant Marcellous Donyae turned to options trading five years ago while attending school, seeking ways to earn income and avoid the burden of student debt. “I’ve always wanted a source of income that provides me with a sense of financial freedom and control,” said the 22-year-old. “Options trading seemed to offer that opportunity.”
The Reality of Financial Insecurity
Despite the diverse range of high-risk investments available, Donyae’s pursuit of a financial safety net highlights the prevalent anxiety among this generation of investors, as traditional economic aspirations increasingly feel out of reach. Soaring housing prices and high interest rates have made home ownership—a long-standing symbol of financial success—seem increasingly unattainable. According to the U.S. Bank survey, three out of ten individuals in Generation Z have abandoned the idea of purchasing a home due to prohibitive costs. This cohort has navigated their young adulthood amid the inflationary pressures brought on by the pandemic and now faces a slowdown in the job market for white-collar positions. Even if they secure employment, concerns over a potential Social Security cliff contribute to long-term uncertainty. Rising credit card debt and the ongoing burden of student loans, particularly after the end of loan suspensions during the Trump Administration, further dampen their outlook. “Everything traditionally associated with economic success appears to be increasingly out of reach,” stated Kyla Scanlon, an economic commentator and author of “In This Economy?” She noted that young people often feel marginalized and perceive a lack of future prospects, leading some to gamble away their finances.
A Complex Approach to Investing
Data from the University of Michigan reveals that individuals aged 18 to 34 have experienced the lowest consumer sentiment ratings of any age group throughout much of this year, marking a shift from previous trends. Young adults in this demographic recognize that while high-risk investing may not represent a sustainable long-term strategy, it provides immediate financial benefits. Kaplan, the sports bettor, allocates a significant portion of his earnings to index funds and savings accounts. He is aware that his current betting practice cannot last indefinitely but hopes that by the time he transitions away from it, he will have accumulated sufficient profits to secure his future. “I don’t consider this a viable long-term income source,” Kaplan admitted. “It’s been financially advantageous for now, but eventually, I plan to withdraw my earnings and move on.”
