Investing looked pretty simple when the S&P 500 headed straight up. But now that it's sinking, many new investors are getting their first taste of big losses.
Thirteen of Gen Z's favorite stocks coming into the year, including Rivian Automotive, Roblox and GameStop lost more than a third of their value just this year so far, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence, Apex Clearing and MarketSmith.
It's been a brutal and swift comeuppance for many newcomers to the market: Giant sell-offs also serve another important reminder of the No. 1 most important rule of investing. And yet, many new investors allowed massive gains to slip through their fingers.
"I owe nearly half a million in capital gains tax for 2021. However, I lost all my money at the beginning of this year," wrote one investor on Reddit's Wallstreetbets who self-identified as a 25-year old who started trading last year. "In January ... I thought I knew how to game Wall Street. I was wrong ... and I lost all my money within weeks."
S&P 500 Shows Stocks Don't 'Always Go Up'
It was popular to think the S&P 500 only goes up in 2021. In many respects, that's exactly what it did.
But gravity is reminding investors stocks indeed fall and buying dips can be dangerous. And the tone on message boards has shifted to one of loss and lament instead of pronouncements of investing prowess.
Gen Z investors, who are younger than millennials and born from the late 1990s to early 2010s. But many of them now are learning how losses can add up fast.
And it's easy to see why. Many stocks Gen Z likes to buy are down much more than the S&P 500's 6.4% drop this year. The ARK Innovation ETF, chock full of stocks with great potential but speculative, is down by 33% this year. But it's far from alone.
Nearly 85% of the top 100 stocks owned by these new investors coming into the year are down in that time. And some of the losses are giant. Investors are down 20% or more on a third of those big holdings and lost half their money or more on 4%. Data on the investors' holdings is maintained by APEX, which clears trades for many of the top online brokerages young investors use.
Where Gen Z Is Getting Hurt Most: Electric Cars
If you're wondering where Gen Z is taking the biggest lumps from stocks, just think about their favorite themes. And electric cars is certainly a top one.
Tesla is the No. 1 top holding of Gen Z investors, Apex says, coming in the year at a nearly 18% position in the average portfolio in this age group. That's an enormous position if you consider the electric car maker is less than 2% of the S&P 500. And that overweight position isn't paying off at all this year. Shares of Tesla are down more than 14% this year.
But that masks the outsized pain Gen Z is taking on the theme of electric transportation. Shares of Tesla rival, Rivian Automotive, is actually the worst-performer in these new investors' portfolios: off nearly 60% just this year. And more than denting portfolio as Rivian their 44th largest position at 0.4% of their portfolio.
S&P 500 Metaverse Holdings Hurt, Too
The whole metaverse, too, has largely made Gen Z investors dizzy from losses.
Shares of Roblox, the $29 billion-in-market value maker of online games, is a favorite way to play the emergence of virtual worlds. During the pandemic, many younger investors were hanging out online in Roblox when they weren't trading. As a result, Roblox grow to be the No. 36 top holding on Gen Z investors. But it's sinking fast, now, losing more than half its value in just a year. Even if you bought it a year ago, you're down by more than 34%.
And it's not just Roblox burning young investors in reality on virtual worlds. Meta Platforms, the company formerly known as Facebook, has faceplanted this year. It's down 38% this year, mercilessly punishing anyone trying to buy it on the dip. And in some ways, this hurts more than Roblox. Meta was Gen Z' twelfth top position coming into the year.
'Meme' Pain For Gen Z
But don't forget about the pain from the 'meme stock' frenzy, at least those newbies who held on waiting for them to "go to the moon." AMC Entertainment, the No. 3 top holding of new investors, is down by more than 40% this year. And that's going to leave a mark if you consider the stock accounted for nearly 10% of the typical Gen Z investor's portfolio.
And don't forget about meme posterchild GameStop. Gen Z investors held a roughly 2% stake of the video game seller's stock, making it their 11th most popular position. And yet, it's down more than 36% just this year. And it's lost half its value this year.
Pointing this out isn't meant to disparage new entrants into the market. Young investors play a key role in the dynamics of the S&P 500 and beyond. But it is a reminder the stock market is highly capable of shredding enormous amounts of wealth.
Making money in stocks, long term, requires a time-tested strategy.
Gen Z Investors' First Taste Of Big Losses
Most-widely held Gen Z stocks down the most this year so far
| Company | Symbol | Stock YTD % ch. | 1-year % stock ch. | Sector |
|---|---|---|---|---|
| Rivian Automotive | -58.8% | n/a | Consumer Discretionary | |
| Roblox | -55.4% | -34.8% | Communication Services | |
| fuboTV | -51.7% | -76.1% | Communication Services | |
| Shopify | -50.5% | -39.2% | Information Technology | |
| AMC Entertainment | -42.6% | 12.0% | Communication Services | |
| Twilio | -40.9% | -56.2% | Information Technology | |
| SoFi Technologies | -40.6% | -48.5% | Financials | |
| PayPal Holdings | -39.6% | -52.8% | Information Technology | |
| Netflix | -38.7% | -27.9% | Communication Services | |
| Meta Platforms | -38.0% | -28.1% | Communication Services | |
| NIO | -37.1% | -54.0% | Consumer Discretionary | |
| GameStop | -36.1% | -52.7% | Consumer Discretionary | |
| Etsy | -35.9% | -34.9% | Consumer Discretionary | |
| Lucid Group | -34.2% | -6.8% | Consumer Discretionary |
