Gen Z investors are facing their first Bear market which is a good thing

A strategy report by HDFC Securities points out that new young investors are experiencing their first large correction, and that’s a good thing. Until recently, a lot of new investors who have signed up in the past 2-4 years only experience of stock market investing was that stocks almost always go up. And that led to alarming levels of overconfidence, with dangerous consequences for both their own portfolios and the stock market as a whole.

The stock market’s recent decline has certainly reduced that overconfidence, if not eliminated it altogether, it is stated.

According to an analysis conducted by Apex Fintech Solutions, the performance of the 100 stocks that are mostly widely held by Gen Z investors is very poor.



The report emphasizes that all of us, at one point or another, have gone through a similar and painful process of becoming older and wiser through experiencing a bear market. The reason that it’s a good thing to experience a bear market is that youthful investors’ overconfidence becomes ever more dangerous the longer it takes for them to experience their first bear market. If it takes too long, these investors’ arrogance will lead them to invest way more than they can afford to lose, and they therefore will lose intolerable amounts when the market eventually turns—as it inevitably will, sooner or later.

"Bear markets teach us an appreciation of valuations and risk, and that appreciation in turns supports the market being an efficient engine of economic growth, allocation of capital, and innovation. If the stock market were always to go up, then the riskiest, craziest, and most undeserving of new companies would gradually suck up the bulk of equity financing", it is concluded.

Click here to download the strategy report by HDFC Securities