Over the past 30 years, the low-cost revolution has transformed finance as we know it. Investors not only now have access to near zero fee mutual funds/ETFs, but nearly every publicly traded firm around the world is available to a U.S. investor wrapped in a tax-efficient and diversified ETF with a few clicks of a button.
While this seemingly is a good thing for the average investor, the appearance of zero costs to trade, paired with high valuation levels, has induced a new type of risky behavior amongst retail investors — seeking out high volatility zero-sum products and turning their back on the less risky, simple, positive-sum products like market-wide ETFs — a behavior akin to financial nihilism, which the World Economic Forum describes as “the sense that the economic system no longer rewards prudence or long-term planning,” a shorthand for Gen Z’s “apparently self-destructive relationship with money, which includes crypto bets, prediction markets and retirement accounts raided to pay off credit cards.”
