Gen Z is the first generation that learned investing through a phone app during a pandemic. The first market event many Gen Z investors experienced was the 2020 COVID crash: a 34% drop in 33 days, followed by a nearly complete recovery in five months. Then came the 2021 meme stock era, then the 2022 crypto collapse that wiped out roughly $2 trillion in market value and took individual coins like LUNA from $119 to essentially zero in 72 hours.
That is a compressed and extreme education in market volatility. Some Gen Z investors drew the right conclusions from it. Others drew the conclusion that the only way to build wealth fast enough to matter is to find the next big thing before it breaks out.
This guide is for the former group, and an attempt to reason with the latter.
What Gen Z Gets Right About Investing
The generation is more financially literate about concepts than any cohort at the same age. Terms like dollar-cost averaging, expense ratios, and index funds have entered mainstream Gen Z vocabulary in ways they never did for millennials at 22. The proliferation of personal finance content on YouTube and TikTok, despite producing plenty of noise, also produced real education.
Gen Z also started earlier. The average millennial opened their first investment account at 25. For Gen Z, the figure is closer to 19, with a meaningful percentage having started during the 2020-2021 lockdown period. Starting earlier is never wrong. The challenge is making sure what they start with is a sound foundation rather than a speculative bet.
The Portfolio to Build: Step by Step
This is not a framework for maximizing short-term returns. It is a framework for building actual long-term wealth, which requires different decisions than most social media investing content suggests.
Step 1: Open a Roth IRA at Fidelity or Schwab
Not Robinhood. Robinhood's Roth IRA feature is relatively new, limited, and the platform culture actively discourages the buy-and-hold behavior that Roth accounts are built for. Fidelity and Schwab have been doing this for decades, have $0 account minimums, offer fractional shares, and have customer service.
The Roth IRA is the correct first account because:
- All growth is tax-free. If you put $7,000 per year into a Roth IRA from age 22 to 30 and never touch it, that $56,000 invested could become over $1 million by retirement, entirely untaxed.
- You can withdraw your contributions (not earnings) penalty-free at any time. This reduces the psychological cost of "locking money away."
- The income limits ($161,000 for single filers in 2024 before phase-out) will not affect most Gen Z earners for years.
Opening the account takes about 10 minutes. Link a bank account and set up an automatic monthly transfer.
Step 2: Buy Your First Fund
At Fidelity, the answer for most people is FZROX: the Fidelity Zero Total Market Index Fund. It carries a 0.00% expense ratio, meaning you pay literally nothing to hold it. It tracks the US total stock market, holding thousands of companies. It is only available at Fidelity, but if you are at Fidelity, it is the cheapest broad market fund in existence.
At Schwab or Vanguard, the equivalent is VTI (Vanguard Total Stock Market ETF) at 0.03% expense ratio. The performance difference from FZROX over 30 years is negligible. Both are correct answers.
Step 3: Add International Exposure
The US represents roughly 60% of global market capitalization. Investing only in US stocks is a bet that the US will continue to outperform the rest of the world indefinitely. That may happen. But diversifying internationally costs essentially nothing and reduces single-country risk.
The standard addition: VXUS (Vanguard Total International Stock ETF) at 0.07% expense ratio. A reasonable allocation is 20% of your portfolio in VXUS, 80% in VTI or FZROX. Some investors go to 30% international. The exact split matters less than having some.
Step 4: Add Bonds Only After 35
Bonds reduce volatility and reduce returns. At 22, you have a 40+ year investment horizon. Short-term volatility is not a problem when you have 40 years to recover from it. Bonds are a drag on performance for young investors because they smooth a ride that does not need smoothing yet.
A simple rule: in your 20s, hold 0% bonds. In your 30s, consider 10%. The classic "110 minus your age in stocks" formula gives a reasonable starting point. At 22, that is 88% stocks, 12% bonds. Reasonable. Going 100% equity in your 20s is also defensible given the long horizon.
Where Crypto Fits (If At All)
The honest answer to where crypto fits in a Gen Z portfolio is: at most, 5-10% of investable assets, in Bitcoin and Ethereum only, and only after the Roth IRA is funded.
Here is why the cap matters. Consider two scenarios from actual historical data.
| Scenario | Investment | Jan 2021 Value | Jan 2023 Value (2-yr later) | Jan 2025 Value (4-yr later) |
|---|---|---|---|---|
| Bitcoin (BTC) | $10,000 | $10,000 | ~$6,800 (-32%) | ~$42,000 (+320%) |
| VTI (Total Market ETF) | $10,000 | $10,000 | ~$8,400 (-16%) | ~$16,200 (+62%) |
| LUNA (Terra crypto) | $10,000 | $10,000 | ~$0.01 | ~$0.01 |
Bitcoin eventually recovered and exceeded its prior peak. VTI recovered faster and with less volatility. LUNA went to essentially zero and never came back. The variance in outcomes is the point. A 5-10% crypto allocation means a total wipeout of that position loses 5-10% of your portfolio, which is recoverable. A 50% crypto allocation that goes to zero is a decade of lost wealth. Altcoins beyond Bitcoin and Ethereum carry LUNA-level wipeout risk. The historical record on individual altcoins surviving more than three years is poor.
Investing With Irregular Income
A meaningful portion of Gen Z earns through gig work, freelancing, or part-time jobs with variable hours. The standard "invest $X per month" advice breaks down when monthly income swings by hundreds of dollars.
Two approaches that work with variable income:
- Percentage-based contributions: instead of $200 a month, commit to 10% of whatever you earn. In a $1,500 month, that is $150. In a $2,800 month, that is $280. This scales automatically.
- Batch investing on good months: when you have a strong income month, invest a larger lump sum rather than spreading it evenly. The money invested earlier compounds longer. This is mathematically superior to strict monthly DCA, though both are reasonable approaches.
For freelancers and self-employed Gen Z workers: a SEP-IRA or Solo 401(k) allows contributions of up to 25% of net self-employment income, far exceeding the Roth IRA limit. If you are earning $40,000+ freelancing, these accounts are worth examining before maxing the Roth IRA.
The FIRE Question
Financial Independence, Retire Early has significant Gen Z interest. The math of FIRE is real: if you can save 50%+ of your income and invest it, you can potentially retire in your 40s or even late 30s. The rule of 25 suggests you need 25 times your annual expenses to retire sustainably on the 4% withdrawal rule.
At $30,000 in annual expenses, that is a $750,000 portfolio. Achievable for someone who starts at 22 and saves aggressively. At $60,000 in annual expenses, that is $1.5 million, which is harder but not impossible by 45 with consistent high savings rates.
The more honest framing: FIRE in its extreme form requires a savings rate most people cannot sustain without sacrificing quality of life significantly during their 20s and 30s. The more useful version is "Coast FIRE": invest aggressively early enough that compounding does most of the work, then reduce your savings rate and work at something you find tolerable. At a 10% return, $50,000 invested at 25 grows to approximately $872,000 by 65 with no additional contributions. Coast to a reasonable retirement from there.
The Numbers: What Gen Z's Early Start Actually Produces
Gen Z's greatest structural advantage over every prior generation is time. A 20-year-old in 2026 has 45 years before the traditional retirement age of 65. Here is what consistent investing produces over that window at a 10% average annual return.
| Monthly Contribution | Starting Age | Balance at 65 | Total Contributed | Compound Growth |
|---|---|---|---|---|
| $100/month | 20 | $948,000 | $54,000 | $894,000 |
| $200/month | 20 | $1,897,000 | $108,000 | $1,789,000 |
| $300/month | 20 | $2,845,000 | $162,000 | $2,683,000 |
| $500/month | 20 | $4,742,000 | $270,000 | $4,472,000 |
$100 a month from 20 to 65 produces close to $1 million. This is not a motivational poster. It is the output of a standard compound interest calculator using conservative historical return assumptions. The majority of that outcome is compound growth, not contributions. The person who invested $100 a month contributed $54,000 and received $894,000 in return from the market. Time is doing most of the work.
The implication: a Gen Z investor who started with Robinhood in 2020 at 18, shifted to index funds in their Roth IRA by 22, and maintains $200 a month through their 30s and 40s will almost certainly end up wealthier than older generations who started later with higher incomes. The time advantage cannot be bought back.
Tools Worth Knowing
| Tool | Best For | Cost | Roth IRA Available |
|---|---|---|---|
| Fidelity | Primary broker, best for FZROX | Free | Yes |
| Schwab | Automated portfolios, Schwab Intelligent Portfolios | Free (automated) | Yes |
| M1 Finance | Pie-based automation for custom allocations | Free (basic) | Yes |
| Fidelity Youth Account | Under-18 investors with parental oversight | Free | No (must be 18 for Roth) |
| Robinhood | Crypto access, simple interface | Free / $5/mo Gold | Gold tier only |
FAQ
Is it too late for Gen Z to build wealth if they are already 25 without any investments?
No. A 25-year-old investing $400 a month in a Roth IRA at 10% average annual return accumulates approximately $2.1 million by age 65. This is not a hypothetical. It is compound interest math on a 40-year horizon. Starting at 25 versus 22 costs roughly $300,000 in final portfolio value on that contribution rate, which is real money but not a catastrophic gap. Starting at 35 is when the math becomes significantly more challenging, requiring substantially higher contributions to reach comparable outcomes.
Should Gen Z buy individual stocks or stick to index funds?
For a primary portfolio, index funds. For a "satellite" portfolio of companies you have genuine conviction about, individual stocks in limited allocation are fine. The standard approach: 90% core index funds, 10% or less in individual stock picks. This lets you participate in specific companies you believe in without betting your financial future on any single outcome.
Is Bitcoin a legitimate long-term investment or still speculation?
Bitcoin has been legitimate enough to recover from multiple 80%+ drawdowns and reach new all-time highs. It has also been volatile enough to destroy short-term investors who bought at the top. At a portfolio weighting under 10%, it is a speculative asset with asymmetric upside potential. At 50% of a portfolio, it is a bet on a single highly volatile asset. The distinction is allocation size, not the asset itself.
What is the minimum income needed to start a Roth IRA?
Any earned income qualifies, and there is no minimum dollar amount. If you earned $1,500 from a summer job, you can contribute up to $1,500 to a Roth IRA for that tax year. Contributions cannot exceed earned income, but any amount of qualifying income makes you eligible. Earned income includes wages, self-employment income, and tips. It does not include investment income, gifts, or allowances.
