Investors’ Guide to Gen Z: Weed, Social Justice and Kylie Jenner

By Craig Giammona, Carolina Wilson and Sarah Ponczek

(Bloomberg) -- Move aside, millennials.

This is the year that Generation Z becomes the biggest consumer cohort globally, displacing millennials as a top obsession for investors trying to figure out how to cash in on their unique shopping, eating and media habits. While they might still be in school, they have spending power to the tune of $143 billion in the U.S. alone, leaving fund managers salivating at the chance to harvest some of that potential alpha.

“Gen Z has their finger on the pulse on the companies that speak to them, that they think are going to grow with them,” said Phil Bak, CEO of Exponential ETFs. “Therefore they’re probably better suited to pick those investments than some of the more seasoned financial professionals.”

Investors have always been interested in young consumers and how their habits might open up new opportunities, but much of the long-held thinking on college kids and tweens—invest in beer stocks or TV networks or junk food—don’t hold up today. Gen Z, roughly between the ages of seven and 22, were born after the internet went mainstream and occupy a world where marijuana is going legal. Anything and everything can be delivered to their front door with a swipe of a finger and they grew up on platforms like Snapchat and Instagram, where the influencer culture has taken hold.

So what does this all mean for savvy investors trying to tap into Gen Z’s buying habits? People in generational cohorts are never as uniform as marketers would like, and with the youngest still in elementary school, there's still some time before the preferences of the wider generation shake out. But for some forward looking investors, now’s the time to start thinking about how to structure a portfolio for a post-boomer economy.

“Gen Z are likely still on the younger end to consider investing in their consumption patterns,” said Jay Jacobs, head of research and strategy at Global X, which created a millennial-tracking ETF called MILN. But “the millennial demographic tells us that there can be clear and obvious differences in the ways that certain generations spend their money. As Gen Z eventually enters their prime earning years, some of these trends could start to become more concrete and visible.”

For investors looking to factor Gen Z into their portfolios, here are some broad trends they may want to consider: