‘Don’t want to be broke’: How Gen Z is getting ahead
Young Australians are using a remarkably simple strategy that takes advantage of the years they will have in the workforce.
With a little encouragement from his father, Phyrell Simpson has cracked the code to retiring a millionaire.
The 20-year-old investor has been buying Australian and US stocks for the last two years for a simple reason, he “doesn’t want to be broke when he is older so he is starting to prepare” his finances now.
By starting young, he is consistently buying and letting his returns compound.
While Mr Simpson says he doesn’t have a strict long-term plan with his investing, he wants to use his returns for big picture goals, including “buying a home” and “having enough for a comfortable retirement”.
Mr Simpson says he keeps his investing simple, with the majority of his money in an ASX and a Nasdaq exchange traded fund.
“It is prettily evenly split. Both markets are both pretty uncertain right now, so I figured it was better to invest in two markets instead of one,” he told NewsWire.
“Short term they can both go up and down, but I think over the long term they will likely go up.”
An ETF, or exchange traded fund, is a type of investment fund that holds a collection of assets like stocks, bonds or commodities and trades on a stock exchange like a regular stock.
It is often seen as simpler investing through buying multiple assets instead of a singe stock, bond or commodity.
In the case of the Nasdaq, it holds the 100 largest US non-financial companies and is heavily skewed towards tech names including Apple, Nvidia, Microsoft and Amazon.
Mr Simpson started investing after some family advice.
“Dad always said just have a go, so I opened my first account at 18,” he said. “I figured the sooner I started, the more time I’d have to grow my money.”
Nabtrade figures point to the power of compounding. Based on a 9 per cent return, investing $200 a month from age 20 could grow to about $1.5m by retirement.
But if an Australian waits until they’re 30 to start, they finish with just $588,000 – almost $900,000 difference, all because of compounding.
Nabtrade director for investor behaviour Gemma Dale says Mr Simpson was just one of a growing number of young Australians looking to invest long term in these passive products.
“What we see is not only are young Australians buying simple products, but more than that, they are being quite thoughtful about the timing of when they invest,” she said.
Ms Dale says Gen Z investors are becoming more tactical and actively watching market trends and waiting for any drop in prices.
“Young Australians are watching market movements and they are timing their buys, so they will buy in much larger parcel sizes on down days,” Ms Dale said.
“They are buying the dip quite thoughtfully, but they are still doing it using simple products.
According to Ms Dale, unlike older Aussies who have to watch their portfolios, Gen Z is using the falls to their advantage rather than as a threat to their wealth.
“They are investing for the long run, they know they’ve got a lot of time on their hands and they know compounding is the eighth wonder of the world,” Ms Dale said.
“You have this incredible opportunity to build wealth, so they don’t worry if the market falls 5 per cent, given they have 30 years ahead of them.
“At the same time they are trying to accumulate by buying cheaply, giving a little edge for buyers.
Originally published as ‘Don’t want to be broke’: How Gen Z is getting ahead
