Gen Z Investors Continue to Ignore SPDR S&P 500 ETF Trust at Their Peril

spy STOCK - Gen Z Investors Continue to Ignore SPDR S&P 500 ETF Trust at Their Peril

Source: Pavel Ignatov /

Generation Z (Gen Z) investors are not having a good year in the markets. According to Investor’s Business Daily and Apex Fintech Solutions, the top 10 holdings of Gen Z investors were down an average of 24.1% year-t0-date (YTD) through Mar. 31. Over the same three months, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and SPY stock were down 4.6%, one-fifth of the losses experienced by Gen Z. 

Warren Buffett continues to be correct: Most investors are better served by keeping it simple and investing in a low-cost S&P 500 ETF or mutual fund. In April, Buffett’s advice was amplified by the accelerating losses for most stocks, including SPY.

Gen Z Should Have Bought SPY Stock

Over the past month, SPY stock’s total return through Apr. 26 is negative 8.1%. As a result, its YTD total return is negative 12.1%. The S&P 500 hasn’t had this bad a year since 2008. The oldest Zoomers would have been 11 when the financial crisis hit. The youngest wouldn’t be born for another four years.    

These younger investors haven’t seen a real downturn. Those who bought an equal-weight portfolio of the 10 largest holdings held by Gen Z investors at the end of 2021 now have an average total return of  negative 24.6%.

Of the top 10 holdings, only two aren’t an S&P 500 constituent: AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME). They’re down 43% and 14% YTD, respectively. So, even though Gen Z’s top 10 holdings’ losses have slowed in April, they’re still double that of SPY. 

The Kiss Rule Applies

If you want to keep your investing really simple, you could opt for the equal-weighted version of SPY, which is the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP). It is down a more palatable 8% YTD, 410 basis points less than SPY. 

On the upside, SPY will outperform RSP because it is cap-weighted, relying on the top 10 holdings to drive its price higher. RSP, which is rebalanced quarterly, doesn’t rely on the largest stocks in the index, but leans on smaller companies to help with the heavy lifting.

Either way, Gen Z shouldn’t ignore SPY or RSP over the long haul. They’ll deliver better risk-adjusted returns than meme stocks, such as AMC and GME.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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