Is Fractional Real Estate Investing The Future Of Gen Z Portfolios?
Detroit, Michigan
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January 26, 2024 08:50 AM Eastern Standard Time
By Austin DeNoce, Benzinga
Technological innovations and shifting priorities among the younger generation are driving significant changes in the world of finance, including public markets. Representing about 20% of the U.S. population, Generation Z is at the forefront of this transition, rewriting the rules of investing as they enter the workforce and shape their financial future. More specifically, this generation is moving away from traditional investment strategies, embracing alternative and fractional investments as key to achieving financial independence and security.
Exploring Alternative Investments
The traditional investment landscape is dominated by stocks and indexes like the S&P 500, but it’s losing its allure with Gen Z. The past year alone saw economic uncertainty weigh on many traditional markets, prompting these young investors to seek alternatives. From the tangible assets of real estate, artwork and precious metals to the digital world of cryptocurrencies, Gen Z is diversifying its portfolios with a keen eye on higher returns and hedging against inflation. However, alternative investments can come with certain challenges – such as adequate liquidity and different flavors of market regulation – that can require a more nuanced and thoughtful investment strategy. That said, these concerns seem to be outweighed by their advantages and alignment with Gen Z’s financial reality.
Gen Z’s Financial Snapshot
Gen Z's current financial standing provides much-needed context for understanding its transition into unconventional assets and investment strategies. Perhaps one of the most important factors to consider is that 46% live paycheck-to-paycheck. Meanwhile, 43% are juggling multiple jobs, and 3 out of 10 are feeling financially insecure, with 26% doubting their ability to save enough for retirement. Finally, while their parents may have had their sights set on a house at the age of 30, 22% of Gen Z are simply aiming for financial independence by that age, underscoring a generation with far less money to invest than the generations before them.
The Allure Of Fractionalized Investments
Within this context, it should be no surprise that fractionalized investment is a concept that resonates strongly with Gen Z. The lower barrier to entry into the investment world by breaking down traditionally large capital requirements into custom, bite-sized investments isn’t just appealing, it’s often the only option for a less cash-flush generation. However, fractional investing also aligns perfectly with Gen Z's values of accessibility and technological ease, opening up a world of owning a small slice of a company, an artwork or a piece of real estate to an entire generation – right from their phones.
Groundfloor: Fractionalized Real Estate Investment
Real estate investing is frequently seen as the bastion of the wealthy, but it’s now within reach of the average investor thanks to platforms like Groundfloor. This innovative platform allows for fractional investment in real estate, a move that aligns seamlessly with Gen Z's appetite for alternative investment avenues and lower barriers to entry. With just a few clicks, anyone can start investing in a diverse selection of properties across various locations, enabling exposure to a tried and true asset class previously uninvestable to those without access to large pools of capital. With Groundfloor’s focus on providing more options and diversification, it’s empowering a new wave of real estate investors, and the company boasts a 10% average return and more than $1 billion invested on its platform during the decade it’s been in business.
The Future Of Finance
Generation Z is charting a new course in the world of investing, with their preference for alternative and fractional investments reflecting a broader shift that values optionality, technological integration and accessibility. As financial realities steer Gen Z away from traditional financial paths, its evolving approach offers a glimpse into the future of investing – one that is inclusive, varied and ripe with innovations to meet their needs. As they continue to navigate this evolving landscape, their choices will undoubtedly shape the future of financial products, with innovators like Groundfloor ready to facilitate their evolving financial goals.
Benzinga is a leading financial media and data provider, known for delivering accurate, timely, and actionable financial information to empower investors and traders.
This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.
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