Some Gen Z investors have given up on building wealth the old-fashioned way. They're going gambling instead.
"When you hit a jackpot or whatever they call it there, that's probably what it feels like, said Preston Coots to Bloomberg, talking about how it felt when his first investment in a microcap stock paid off. "I feel like a genius. I just created money out of nothing."
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The 25-year-old has continued to invest in high-volatility assets, such as penny stocks and crypto, in the six years since his first big bet. He's seen around a 30% return in those six years — significantly less than he would have made if he invested in the S&P 500.
He's also wiped out completely multiple times.
Coots isn't the only Gen Z investing this way. Over 70% of Gen Z investors have crypto take up more than a third of their portfolio, according to the World Economic Forum. According to the CFA Institute, they're also less likely to invest in mutual funds than millennial or Gen X investors.
Why are Gen Z investors so interested in high-risk, high-payoff investments? And is that strategy working out for them?
Some Gen Z investors see traditional wealth building as too slow — they're gambling on 'much higher returns' from volatile bets
The U.S. is headed toward an increasingly K-shaped economy. Wealth inequality has increased over the past several decades; according to the Congressional Budget Office, the share of wealth held by both the top 10% of the US has grown by 4% since 1989, up to 60% total. In comparison, the bottom half only holds 6% of total wealth.
To make matters worse, cost of living has grown increasingly unaffordable. According to Brookings, almost half of U.S. households don't earn enough to make ends meet — a number that's gotten significantly worse since the COVID-19 pandemic.
This has left some Gen Z investors feeling like traditional methods of building wealth won't let them meet their financial goals.
"With how expensive life is, it is difficult for people to accomplish the goals that they want to accomplish," says Ish Lukhey, a 23-year-old investor, when speaking to Bloomberg. "You used to be able to with just one high or medium-to-high income."
At the same time that Gen Z is feeling the squeeze, prediction markets like Kalshi and Polymarket have entered the picture.
These platforms call themselves financial products — in a recent New York Times interview, Kalshi founder Tarek Mansour said there was "a new Wall Street being formed" — but in practice, allow their users to bet on anything from the next President to sports games. (Kalshi specifically added 3 million new users during the course of the FIFA World Cup.)
These markets hold the allure of big wins, but in reality you're more likely to lose money than you are to make money. A study by the University of Toronto found that almost 70% of Polymarket users make a net loss from the platform.
According to Northwestern Mutual, 32% of Gen Z say they have used or are considering using prediction markets, more than any other generation.
Wanting to get lucky from high-risk investments can feel right, but the numbers don't play out
Gen Z's behavior isn't coming from nowhere. Economists from the Universities of Miami, San Diego, and Colorado at Denver found that "lottery-like" investments increase as inflation increases. Since Gen Z is having to deal with a higher cost of living, it makes sense that they'd also be drawn to those investments.
But the numbers don't work in Gen Z's favor. Those same economists found that lottery-like stocks performed worse when more people invested in them, becoming overpriced.
And in general, it's hard to outpace the S&P 500 — especially over a long period of time. Over the past 40 years, the S&P 500 has had an average annual return of 11.5% according to Fidelity.
In comparison, one study found that only 13% of day traders make money each year, and less than 1% consistently outperform.
Successfully trading risky assets takes a lot of knowledge and skill — things that Gen Z might not have had time to pick up. Especially since Gen Z rates low on financial literacy scales; on average, Gen Z only answered 38% of questions correctly on the 2026 Personal Finance Index, or P-Fin Index. That's lower than any other generation.
On average, Gen Z scored only 35% on the investing portion of the index.
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This article originally appeared on Moneywise.com under the title: Over 70% of Gen Z investors hold a third of their portfolio in crypto — and only 13% of day traders make money
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Source: Yahoo Entertainment
