Most S&P 500 investors think they're geniuses — until their first crash. Gen Z, which rushed into stocks in 2020, might be getting theirs now.
A dozen stocks most widely held by new Gen Z investors, including consumer discretionary firms Mullen Automotive and Rivian Automotive plus communications firm Roblox, already lost more than half their value just this year, says an Investor's Business Daily analysis of data from Apex Fintech Solutions and MarketSmith. It's a brutal beatdown that's serving up a reminder that stocks — even popular ones on Reddit — can and do go down in epic fashion.
Seeing stocks crash is a novelty for many younger investors. Many have never lived through a big drop. Apex analyzed more than 1.3 million brokerage accounts held by investors born after 1996 as of March 31, 2022 to find the 100 most widely held stocks. Gen Z is the youngest cohort of investors, aged 24 or younger.
And yet, this is a stock smackdown of historic proportions in many of the widely held positions. It's big enough to leave an indelible imprint on how this generation approaches investing in the future.
Younger investors might be learning a lesson. "Feel free to invest in whatever you believe in, but just know that they may not be money-making ideas," said Jessica Rabe of DataTrek Research. "That means you will need to both save more and invest in other areas more aggressively in order to reach your financial goals."
Learning From S&P 500 Pain
Painful losses can be the best teachers. And young investors are finding that out now.
Baby Boomers got schooled when "Nifty Fifty" stocks fell apart in the 1980s. And Gen Xers still sting from the Dot Com bust of the late 1990s. But now it's younger investors' turn to experience the lessons of a sell-off in speculative companies long on promise and short on fundamentals.
Watching how stocks held by Gen Z fare is especially interesting as this group personifies the market of 2020. Many rushed into the market to buy high-growth stocks, light on profit, to ride them up for fast gains. But now, due to rising rates, high inflation and supply-chain problems, many of these go-go bets are crashing back to earth even faster than the S&P 500.
Some of Gen Z's big losses are even coming from S&P 500 stocks. Netflix is the top example of that. Shares of the online streaming company most Gen Z investors subscribed to at birth are the No. 18 most popular position in the generation's portfolio. And yet, shares are down a bruising 68% this year, making it the worst stock in the index.
But that's not even the biggest hit the generation is taking.
Suffering From Speculation Outside The S&P 500
Gen Z infatuation with electric cars is starting to get expensive. That industry group is home to many of young investors' worst stocks this year.
Mullen Automotive, a Brea, Calif.-based maker of electric cars, is an utter disaster. Shares of the company are now reduced more than 75% to essentially a penny stock. It's not all that surprising for more experienced investors. Not a single major research firm provides any profit forecasts for the company. Additionally, the company is emblematic of the kinds of stocks that burned younger investors. Not only did the company lose more than $75 million last year. It only posted $222,000 in revenue. Too bad it's Gen Z's No. 54 position.
But the No. 55 position isn't much better: Rivian Automotive. The company lost more than $4.6 billion in 2021, which isn't easy to do when you only bring in just $55 million in revenue. Yes, analysts think the company's revenue will soar this year to $1.9 billion. But losses, too, are expected to be massive for many years. Analysts think the company will lose billions until at least 2026. That includes an expected $5.9 billion loss in 2022. No wonder the stock is down 70% this year.
And even "can't miss" themes like the metaverse are souring on Gen Z. Roblox, a maker of online virtual worlds, has seen its stock plummet more than 70% this year. Yes, it had $2.7 billion revenue in 2021. But it's seen losing $569 million in 2022 followed by progressively larger losses in 2023 and 2024. It's the generation's No. 48 position.
But Wait! A Bright Spot
If there's any comfort, it's that none of Gen Z's top three most popular stocks are down by half. But that's not much of a comfort.
It's important to note, though, Gen Z also holds Tesla in big amounts. It's their No. 1 position. But even that stock is down nearly 19% this year. That's hardly a blue-chip to build a solid portfolio on. And their No. 2 most popular stock, Apple, is also down albeit by a less harrowing 11.4%. But the good new runs out fast. What's Gen Z' third most-popular stock? Former Meme stock AMC Entertainment. And that massive position is stinging now. Shares of the stock are down more than 47% this year.
All investors learn how to build a good strategy long term. Looks like Gen Z might get an opportunity to think about that now.
Worst Stocks Commonly Held By Gen Z Investors
Biggest drops in the generation's top 10 holdings
| Rank March 31, in Gen Z portfolios | Company | Symbol | YTD % ch. | Sector |
|---|---|---|---|---|
| 54 | Mullen Automotive | -75.0% | Consumer Discretionary | |
| 48 | Roblox | -70.5% | Communication Services | |
| 55 | Rivian Automotive | -70.4% | Consumer Discretionary | |
| 50 | Shopify | -70.0% | Information Technology | |
| 18 | Netflix | -68.7% | Communication Services | |
| 25 | SoFi Technologies | -56.8% | Financials | |
| 37 | Coinbase Global | -54.7% | Financials | |
| 23 | PayPal Holdings | -54.7% | Information Technology | |
| 91 | Riot Blockchain | -54.4% | Information Technology | |
| 59 | Marathon Digital | -51.6% | Information Technology | |
| 13 | NIO | -51.5% | Consumer Discretionary | |
| 16 | Lucid Group | -50.5% | Consumer Discretionary |
