In response to high inflation and interest rates, American investors have been active in the stock market. But no group has been more active than younger investors, especially Gen Z, according to a recent Bankrate survey, though millennial investors were also quite active. The group of investors includes anyone with stock or a stock-related account such as a 401(k).

Nearly 9 in 10 Gen Z stock investors (ages 18-26) were taking action on their investments in 2023 due to inflation or higher interest rates, including buying, selling, or withholding additional investment. In second place, almost 7 in 10 millennials (ages 27-42) were taking action, compared to an average of 52 percent of American investors overall.

While being an active investor is generally associated with lower investment returns, in the case of these young Americans, they’re taking some moves that may lead to higher returns.

Young investors are active in the market

More than half of American investors (52 percent) said that they had bought, sold or withheld investment due to inflation or higher returns on safe investments (such as savings accounts), or both. But it’s young investors, Gen Z and millennials, who are really driving up that average. And ironically, these young investors are more likely to buy stock than older Americans.

Here’s how Americans responded to either higher interest rates or inflation by age group:

  • 87 percent of Gen Z investors took action, either buying, selling or intentionally withholding stock investments.
  • 68 percent of millennial investors made one of these active moves.
  • 38 percent of Gen X investors (ages 43-58) took action due to inflation or higher rates.
  • 35 percent of baby boomer investors (ages 59-77) bought, sold or withheld investment.

But perhaps the most surprising result of the Bankrate survey was that young investors were the most likely to buy stock, not merely bailing out of the stock market.

  • 53 percent of Gen Z investors expect to invest more in stock-related investments this year than last year, compared to 14 percent who expect to invest less.
  • 43 percent of millennial investors expect to buy more stock-related investments this year, compared to 15 percent who will invest less.
  • Just 19 percent of Gen X investors expect to invest more in stock-related investments in 2023, compared to 21 percent who will invest less.
  • Only 9 percent of baby boomer investors expect to put more in stock-related investments this year, compared to 23 percent who plan to invest less.

The move to invest more – done correctly – may wind up being beneficial for young investors, and it’s particularly valuable since Americans’ top financial regret is routinely not saving enough.

In fact, 21 percent of Americans said not saving for retirement early enough was their top financial regret in a recent Bankrate survey. In total, 39 percent of Americans said not saving enough (for retirement, emergencies, children’s education) was their number-one regret.

For reasons such as these, making smart investing decisions is so vital. But investing more is not the same as investing smartly, using time-tested principles to build wealth. So the fact that young investors plan to invest more may be a positive if they’re using wise strategies.

How Americans can earn more on their investments and avoid savings regrets

Investors looking to maximize their gains ultimately need to shift from a short-term mentality to a long-term one, from a trading mentality to an investor one. Or to put it in yet another way: they need to shift from an active approach to a passive approach. Here’s why.

1. Passive investing beats active investing

The evidence has been shown over and over again: passive investing beats the vast majority of investors, including the pros. A report from S&P Dow Jones Indices shows that about 95 percent of U.S. fund managers are unable to beat the market over 20 years. The pros – whose only job is to outpace the market – can’t even keep up.

The solution for individual investors, then, is simple – be the market. Buy a broadly diversified index fund, such as one based on the S&P 500 stock index, add to your position regularly and then hold on. Over time you’ll earn the index’s returns, which historically have been about 10 percent annually. While you may be tempted to sell for any number of reasons, such as market volatility, you need to remain a passive investor if you want to earn the index’s long-term return.

2. You can compound faster as a passive investor

Of course, if your annual gains are better as a passive investor, then you’ll be able to compound faster. But there’s also another reason at play: you won’t have to pay taxes on any unrealized gains, so you can hold your stocks for decades and they can compound faster.

In effect, the government is giving you an interest-free loan and letting you compound the investment. Only when you sell the investment for a profit does the government collect its share. In the meantime, you’ve been compounding on the government’s share of the investment.

3. Traders run up taxes

The flip side of compounding returns is taxes, and every time you realize a profit by selling an investment, you’ll owe Uncle Sam a cut of the action. So not only will you miss out on that interest-free loan and the subsequent compounding, you’ll have to cut the government a check.

You may get a more advantageous tax rate on capital gains by holding your investments long term – that is, more than a year – but it’s still money out of your pocket.

4. Traders are likely to miss the big days

It may seem smart to duck into and out of the market, but remember that passive investors beat active traders. And there’s a good reason for that: traders are likely to miss out on the market’s biggest days. You need to be invested in the market to capture those days, not dodging losses.

A recent report from Bank of America reveals how your performance can be damaged by being out of the market. The S&P 500’s total return from 1930 to 2020 was 17,715 percent. But what if you had missed only the market’s 10 biggest days each decade, a total of 90 days over those nine decades? Your total return would be a pitiful 28 percent across the entire period.

That’s why investors say “time in the market is more important than timing the market.” You get the market’s long-term returns if you stay invested, not if you’re trying to get short-term profits.

5. Trading is a zero sum game

Trading is a zero sum game, meaning that if you win, someone else loses, and vice versa. So trading is a game played against the sharpest traders, those with highly developed trading skills and algorithms, who are looking to take your money. It’s not a game for individuals.

But if you’re an investor, you can play a positive sum game. You’re investing in the success of a company, and its growth can make you and other investors money over time.

Bottom line

While many young Americans are actively deciding to invest more in the stock market this year, it’s important that those looking to increase their financial security understand how to build wealth using proven strategies. Chief among these strategies is a passive approach that takes a long-term perspective, giving individual investors the best chance of success.


  • All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,676 adults. Fieldwork was undertaken April 17-20, 2023, and the survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18+).