This Faith in Finance podcast is underwritten in part by Sound Mind Investing. For more than 30 years, do-it-yourself investors have relied on SMI for proven strategies and trustworthy guidance. SMI helps people build wealth so they can provide for their families, prepare for the future, and give generously. Learn more at soundmindinvesting.org. Younger investors are reshaping the markets from crypto and AI to ETFs and gaming.
I am Rob West. But with so many new platforms and voices, how do we navigate investing wisely across generations? Today, Matt Bell joins us to share what's changing, what's timeless, and how biblical wisdom can guide us in a fast-moving market. And then it's on to your calls at 800-525-7000. That's 800-525-7000.
This is Faith in Finance, biblical wisdom for your financial decisions. Joining us today is my friend Matt Bell, managing editor at Sound Mind Investing, one of our trusted ministry partners. Matt, great to have you back. Thanks so much, Rob. It's always good to be with you.
I've been looking forward to our conversation. I'm right there with you. And in a recent SMI newsletter article, Matt, Not Your Father's Portfolio: A Generational Divide in Investment Preferences, you captured this shift so well at a high level. How are younger investors reshaping the investment landscape today? In some pretty dramatic ways, Rob.
Since 2020, millions, literally millions of new investment accounts have been opened, largely by younger investors. And in fact, in 2021, Schwab did a really interesting study. They found that 15% of all U.S. stock market investors began investing in 2020, which is remarkable. And a lot of those folks were younger investors, Gen Z, which is basically age 29 or younger, and millennials ages 30 to 45.
And so that's just a really remarkable change. And it's also counterintuitive because as listeners probably remember, 2020, that's when the COVID-19 pandemic began sweeping the U.S. And initially, the stock market fell really, really hard. And oftentimes when the market falls, people leave the market, but not this time. And Rob, I think the reason can be kind of tied to what I would call a sort of a perfect storm that was happening at that time.
People had time on their hands because of COVID. They had money in their pockets because of the pandemic stimulus money. And then Then there was a lot of media attention, if you remember, towards social media influencers who began live streaming their day trading, getting the impression that there was easy money to be made in the market. And of course, the advent of no commission and fractional share trading kind of factored into the whole thing as well. There was a certain trading platform that kind of gamified trading by showering user screens with electronic confetti whenever they made a trade.
So just a lot of factors that ended up pointing younger people, many, many younger people toward the markets. Wow. Yeah. When you describe it that way, it's dramatic.
So, what sets the approach of younger investors apart? How are they engaging the markets differently? Yeah, well, not surprisingly, they're more comfortable than older investors using investment apps to make their buys and their sells. And they're more interested in the newer categories like crypto or AI or so-called fintech. They're more likely to get their investment advice from social media, which we can talk about, or friends than from a financial advisor.
And now, this next one, if there are younger people listening to this conversation, don't shoot the messenger. But the research says that younger investors tend to be more attracted to get-rich quick stock investment ideas. And interestingly, when they use mutual funds, they're more likely to use ETFs than traditional funds. Yeah. Why do you think ETFs have become the go-to choice for so many younger investors in particular?
Yeah, I mean, the idealist to me would like to think it's because ETFs often have lower expense ratios than traditional funds, and they can be more tax efficient. But I have to believe that part of the reason as well is that ETFs trade like stocks. Younger investors tend to make more trades than older investors.
So I think the fact that ETFs are priced throughout the day just makes them more attractive to more active investors. Yeah. When you move past the structure, Matt, and look at the specific themes, crypto, fintech, AI, even gaming, the contrast gets even sharper. What jumped out to you in the data? Sure.
So not surprisingly, younger investors more so than older investors are interested in cryptocurrencies. Although the interest is growing quickly across the whole age spectrum with regard to cryptos, gaming-related funds, those that invest in video game companies and also those involved in sports gambling, they have a big generational divide with the youngest investors showing more interest than older investors. And then fintech, as well as AI and machine learning funds, those are showing strong strong growth in interest. But in those categories, that's really across all age segments. Yeah.
Well, this is fascinating. We'll continue to unpack this after the break and talk about what opportunities and risks exist here. We'll talk about as parents and grandparents how you can come alongside younger investors. And what about alternative assets? How does that play into this?
Matt Bell's here today, Matt's managing editor at Sound Mind Investing, a trusted ministry partner here at Faith and Finance. We'll be right back. Do you What we do is very special and it's very unique. This is Bethany. She is a Certified Kingdom Advisor.
I became a CKA because we're not building bigger barns and we're not trying to figure out how can we just amass more and more and more. We're figuring out how much do you really need? What are your priorities? What has God called you to? And then how can we give it away?
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More information, including a short video webinar on profit and peace of mind no matter what's happening in the market, is available at soundmindinvesting.org. A new generation of investors have entered the markets. What are they thinking about? What drives them? And what are they investing in?
Matt Bell is here today. He's managing editor at Sound Mind Investing, one of our ministry partners here at Faith and Finance. And Matt, you know, at face value, this incredible move on the part of these younger generations into the markets as investors, that's a good thing, right? I think it is. You know, young people have time on their side, and time is one of the most critically important ingredients for compounding.
So I think it's generally a really good thing to get interested and get started with investing sooner than later. But I do worry a little bit about maybe some of the motives that have drawn many younger investors into the markets and just in some ways, the way that they're going about investing. Yeah, no doubt about it. By the way, folks, if you want to read this article we've been discussing today, it's called Not Your Father's Portfolio, a generational divide in investment preferences. You can head over to soundmindinvesting.org.
That's soundmindinvesting.org and read it today.
Now, Matt, what I find fascinating is that interest in crypto and AI isn't just a young investor thing anymore. As you noted, we're seeing growing interest across every generation. What do you think that says about where investing culture is headed? Yeah, things are changing fast. I mean, you had crypto Super Bowl ads back in 2022.
People might remember those. And at that time, you had to go through a crypto exchange to make a purchase, which was a very unfamiliar process for most and probably for some a bit scary. The ads even hinted at that, saying their tagline, I think, was fortune favors the brave. But just two years later in 2024, the SEC approved the first Bitcoin ETFs, which made it easier than ever for lots of people to add cryptocurrencies to their portfolios. At the same time, we're seeing a push to open 401k plans to private equity and so-called alternative investments.
So, from your vantage point, Matt, what opportunities and also what risks does that create for everyday investors? I think there's a risk here of letting publicity about all that and availability run ahead of knowledge. Private equity has a certain aura around it. It's been a type of investment only available to wealthier investors previously. And there may be a sense among some investors that, hey, if my employer has added this to my 401k plan, it must be okay.
But I would just encourage anyone thinking about putting a toe in that water to make sure they do some due diligence first. It may be that private equity will be added initially to target date funds. But even there, for many years, we've been encouraging people to understand the asset allocation of these popular target date funds that they're considering, since the target allocation may or may not be aligned with their optimal asset allocation. And now, with the advent of these private equity investments being added potentially to target date funds, we'd encourage people to make sure they understand what investments are held by the fund they're considering and make sure they're comfortable with those investments. Yeah.
Matt, you referenced social media a moment ago and the fact that these younger investors are now looking to social media for their advice. Why is that a problem?
Well, anyone with a social media account has the potential to gain a following. And the reality is today we're so overly communicated that there's a lot of people competing for attention. And the ones that tend to succeed are often the ones that have the most controversial points of view.
So if you're going to look to social media for advice about investing, I would just be sure to check the credentials of the people giving the advice. Yeah, that's great. Matt, there's a lot of parents, grandparents, and mentors listening today who want to be able to walk alongside the next generation as they invest wisely without coming across as outdated.
So how would you encourage them to start that conversation? Yeah, I'd start by affirming their interest in investing. It's a good thing. You know, young people getting started with investing at their young age is a good thing.
So emphasize that start there. And emphasize that time is an invaluable asset that they have, God willing, in abundance.
So, you know, time is one of the most important ingredients that fuels compounding. But then show them that the Bible actually has certain principles that can inform a good God-honoring investment process, which might be news to them. Principles like diversification, taking a long-term, steady approach to investing, the use of wise counselors. You know, encourage them not to take this ad hoc approach to investing, which might be promoted through social media, people suggesting this investment or that. You want to be careful about doing that.
Much better to follow a process-driven strategy that uses objective criteria in deciding what to invest in, because that can help keep emotion out of the investing process. And then the last thing is, I would encourage them to continue. Learning about investing, but be discerning about who they listen to.
So, if they listen to Faith Phi regularly, if they read the SMI blog, those would be some good choices. Yeah, let's dig into that idea of process a bit more. I know that's something Soundmind Investing consistently highlights. Why is having a clear objective strategy, especially in an environment moving as quickly as this one, so vital for investors? Yeah, I think it ties to the importance of remembering whose money we're investing.
You know, it isn't our money, it's God's money. And our responsibility is to manage that money, to manage his money for his purposes and according to his principles.
So investing according to some objective process-driven strategy that keeps emotion out, both sides of the spectrum, the fear and the greed. It takes that off the table. You know, because there are a lot of risks involved in investing, as we know, there's market risk, inflation risk, et cetera. But really, the biggest risk is getting in our own way by being swayed by our emotions.
So when you commit to this objective process, it'll go a long way toward keeping you on course. Yeah. Matt, you've also underscored how vital it is to really understand what you own, especially with these newer or more complex investments like crypto.
So practically, what does that look like for investors day to day? Yeah, I think it's just good stewardship that as we invest money, we understand what we're investing in. And so here's the acid test, and this is purely my opinion: is that could you explain what you're invested in and why to a middle schooler? I think that's a good question to ask ourselves. Because after all, we've been entrusted with the responsibility to manage God's resources.
So I think it just makes sense that we would be clear in our own minds about our rationale for why we're doing what we're doing and be able to clearly articulate it to someone at the middle school level. And I think if people, if more investors took on that challenge of being able to really clearly explain what we're invested in and why, it'll just drive us toward becoming better investors. This is so helpful. Matt, we're nearly out of time, but scripture reminds us that wealth is meant to be built steadily and with discipline. You've referenced that, not speculation.
In a world where investing is increasingly gamified, how can investors of every generation keep their portfolios aligned with what truly matters? Yeah. Yeah, I mean, it's funny, using the words gamification and investing in the same sentence is a little bit jarring, isn't it? Yeah, but that's exactly what's happening. And so, with these changes that we're seeing in our culture, the kind of blurring of the line between investing and gambling, it's just really important, especially as Christians, to keep God's word front and center.
The Bible has some very clear principles that pertain to investing. Ecclesiastes points us to the wisdom of diversification. 1 Timothy 6:10 and other places warn us against loving money and pursuing wealth too quickly or recklessly. Proverbs 21:5 encourages this steady plotting approach to investing.
So, these principles, you know, they may not lead to lots of likes or hearts on social media, but you can't go wrong in following them because they're all biblical principles. Every generation invests differently, but God's principles for stewardship haven't changed. Invest with purpose, patience, and a process that honors Him. Matt, so glad to have you with us today. It's my pleasure, Rob.
I really appreciate the chance to talk about all this, and I really do hope that listeners will embrace a biblical approach to investing, not what's trending on social media. I couldn't agree more. And for more than 30 years, folks, do-it-yourself investors have trusted Sound Mind Investing for proven strategies and reliable guidance. You can learn more and read this article at soundmindinvesting.org. All right, your calls are next: 800-525-7000.
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You can call right now. Let's go to North Carolina. Hi, Terry. How can I help? Hi, Rob, I want to thank you for how kind you are to people when they call you.
I appreciate it so much. And my first question is. My husband is going to be retiring next year. He's going to move his 401k over to a Rolf. I'm assuming.
And I also have a small 401k. Can we bundle them when you're laid? Yeah, unfortunately not.
So IRAs, first letter in that I is for individual, and so you can't combine them.
So each spouse's retirement account has to stay in their own name. The IRS does not allow joint IRAs.
Okay. I was just going to also going to add, my IRA is very small. I'm a retired teacher. I get a pretty what I think is a good retirement check every month. And so I know you're going to say no, would it be wise for me to just remove that from my investment?
Mine's actually a 403B. Um Would it be wiser for me to remove that from that investment and put it in something else and give it to my boys or? What would you say? Yeah, I mean, I like you socking this away on a tax-advantaged account, and I think that's great.
Now, if you guys are already on track and you've got plenty of assets or you're on track to have what you need, and you'd rather take this money and give it away to the Lord's Work or to your boys or something like that, great. There's nothing wrong with that. But you don't have the option, apart from a company-sponsored plan or an IRA, to put money away on a tax advantage basis that you can have down the road as a nest egg. And Social Security was never intended to cover more than 35 to 40 percent of your pre-retirement income, and most people live on 80 percent. And so you've got to have some savings that can generate some additional income.
To fund your lifestyle, whatever that is, between you and the Lord in retirement. And so I just think you using these working years to continue to sock some money away while holding it loosely and trusting God as your ultimate provider and giving generously and balancing your other priorities is a good thing.
So I like you contributing to that 403B, but I would want you to do it in light of an overall plan that reflects your values and your goals. Yes, sir. Thank you so much. Be blessed. Thank you, and you as well.
All right, uh headed to Tennessee. Mary, go ahead. Hi, thank you for taking my call. I would like to set up a 529 savings for my new great-grandson. And can you give me information on this savings plan and investing in his future?
Yeah, I like the 529 college savings plan a lot, Mary. It's a great way to help your new great-grandson prepare for future education costs. Here's what you need to know: it's tax-free growth.
So the money grows tax-deferred, and withdrawals are tax-free when used for qualifying education expenses.
So think college, trade school, grad school, even some K-12 tuition. You stay in control. You're the account owner.
So you control the money and how it's invested. And it's flexible. If the child doesn't use it, you could change the beneficiary to another family member. It even, through new legislation with Secure Act 2.0, you can eventually roll it over up to $35,000. Into a Roth IRA, which could be a great option to be able to cede a long-term retirement plan if he doesn't use it.
And if he gets scholarships and/or grants, you can get the money out on a pro-rata basis based on those scholarships and grants. The 529 is opened at the state level. Every state has one, and you're in the state of Tennessee. You know, it is a good plan. It offers flexible contributions.
They have age-based investments, which makes it pretty simple because you just put in the age of the child and it will automatically get more conservative as the child gets closer to college.
So you don't have the volatility. You know, it doesn't offer a state income tax deduction or a credit in Tennessee for 529 contributions, which some do.
So that may mean you could look elsewhere. And I'm going to give you a website to go to. And what they do is they're constantly rating the 529 plans based on. On the features of the plan, but more importantly, the investment performance. And you might find that another state's plan outperforms Tennessee.
And because Tennessee doesn't give you that in-state income tax deduction, there's really not any benefit to stay in Tennessee because the money of any state's 529 can be used at any college, you know, trade school, university in the country, even some outside.
So I would head to savingforcollege.com, savingforcollege.com, and you can run through their online tool to determine the best state for you. And then you'd open it up online. It'll take you just a few minutes. And then typically people set up a monthly contribution, but you can also put in a lump sum as well. You may want to try to stay under that annual gift limit.
You could go over that. You just have to tell the IRS you did it, even though it wouldn't be taxable. But what questions do you have on all that? I know I threw a lot at you.
Okay, you did.
Well, I'm going to work with my grandson to help me do this because can I make him the bid him and his wife the beneficiary of this? Because I'm 86 and I have my own things for them. But since I'm older, I mean, I wanted to make a one-time when he's born. And then what about contributions for the other family members besides myself? Does it just have to be myself?
No, no, others could contribute. There does need to be one owner. And so your son could be the owner of the account. Your great-grandson would be the beneficiary.
So it's for the benefit of the child, but your son could be the owner of it. And then you and he and others could contribute to it.
Okay. Well, it sounds like a lot to learn. Yeah, I mean, the bottom line is it's a really tax-advantaged vehicle. It's simple to set up. The only real decision you need to make is what state's 529 to put it in.
And it could just be real simple. You just go with Tennessee's plan if you want. But if you wanted to do a little bit of homework, or maybe your son helps you do some homework to see is there another state that might be more favorable in terms of investment performance, specifically because Tennessee offers very little resident benefit. Whereas some offer more, so it makes it more, you know, there's more incentive to go to another state's plan. That's where this website I've given you, Saving for College, might help you and your son decide whether another state's 529 is better.
But the setting it up and funding it and picking the investments, they make it very easy.
So there's nothing really to be concerned about.
Okay, I really do thank you for that because I think that's the best way that I can help them get started for his future, and he knows he has to save. Yes.
Well, it'll be a real blessing to them and to your great-grandson.
So listen, congratulations, Mary. Thank you for calling today. Lord bless you. Thank you for your service. Bye-bye.
Well, folks, thanks for being along with us today.
So thankful for your comments, your kind remarks about the program. You know, it's my high calling and privilege to be able to come alongside you each day and tell you you can do this. You can be that wise and faithful steward that you want to if you're thoughtful about it, if you lean into God's word, if you heed the counsel of scripture and not the consensus of this world, and we want to help to encourage you to that. And big thanks to my team today: Brent, Adam, Jim, Taylor, and everybody here at Faith By. We'll see you tomorrow.
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