Here are the rookie mistakes being made by millennial and Gen Z investors

• Trying to pick single stocks. Those can be short-term winners, but “most don’t even beat low-risk U.S. Treasury bill returns over the long run,” says Rabe, who adds picking winners requires fundamental research and discipline. Just 2.4% of global stocks were responsible for global equity gains from 1990 to 2020, but big indexes always come back and create value. Better to invest in exchange-traded funds (ETFs) that track the S&P 500 — the SPDR S&P 500 ETF Trust
  SPY
  — or the Invesco QQQ Trust
  QQQ
  for the Nasdaq 100.

• Treating investing like gambling. “Most investors make money if they stick to major U.S. stock indexes for at least several years,” she says, adding that despite all the crisis over the last two decades, the S&P 500 is on the doorstep of a new record high.

• Thinking you don’t have enough to invest. Build up that emergency fund, but then look into buying fractional shares in a brokerage account. Putting $100 in the iShares Core S&P 500 ETF
  IVV
  today and $50 monthly for 30 years would yield $100,000 if the S&P 500 earns a typical 10% annual return rate.

• Only investing in companies you “believe in.” The iShares Global Clean Energy ETF
  ICLN
  is down 26.5% year to date, which means an investor would need more savings and aggressive investments elsewhere to hit financial goals. Be aware that many theme funds or ESG products invest in energy or heavily in big tech, says Rabe.

• “Letting big gains cloud your judgment.” Risk management should always be a priority. So don’t base future decisions on that big crypto win. And always diversify — not just digital currencies but also the stock market.

• Fear of missing out (FOMO). Social media is full of young investors making a killing on cryptocurrencies during the pandemic, leaving everyone else to worry they’ll miss the next big boom. “They got very lucky under unique circumstances…not a fair benchmark for your own success,” says Rabe. Cryptos are volatile and speculative so invest only as much as the cost of a nice lunch. Young people are more trusting of technology so cryptos appeal, but they lack regulatory structures that make U.S. stocks solid long-term investments. So invest sparingly and diversify elsewhere.

• Options investing: “They see peers on TikTok or Instagram discussing how they’ve made money with these strategies and want in on the action, but inexperienced investors need to understand that most equity-linked options end up being worthless,” says Rabe. Those are an especially bad idea for younger investors because all of that money will “likely disappear.” If the S&P 500 compounds at 10% for the next 40 years, like the last 40, $1,000 invested in that today instead of options, would mean $45,000 in four decades.

Plus: ‘Is this a stock market, or a casino?’ New 4X leverage S&P 500 ETN met with caution

The markets

Stock futures
ES00,
+0.16%

YM00,
+0.09%

NQ00,
+0.20%
are tilting higher after back-to-back losses for the Dow
DJIA
and S&P 500
SPX.
Bond yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
are steady and gold is inching up at $2,040. Oil
CL.1,
-0.86%
is off 1%. German stocks
DX:DAX
are climbing after Tuesday’s record close.

The buzz

In the cloud space, Box shares
BOX,
+0.72%
are sinking on weak sales guidance, with MongoDB
MDB,
+2.52%
falling despite beating forecasts.

And: Apple is a $3 trillion company again, for the first time since August

Wall Street bank CEOs, including JPMorgan’s
JPM,
-0.01%
Jamie Dimon, are due to appear before Congress on Wednesday, and are expected to caution against stiffer regulation for lenders.

British American Tobacco
BTI,
-1.22%
wrote down the value of its U.S. cigarette brands by $31.5 billion.

Private-sector payroll data is due at 8:15 a.m., with third-quarter revised productivity and trade deficit numbers at 8:30 a.m.

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Inflation is falling but interest rates will be higher for way longer.

The chart

Are the Magnificent Seven stocks — Alphabet
GOOGL,
+1.33%,
Amazon
AMZN,
+1.41%,
Apple
AAPL,
+2.11%,
Meta
META,
-0.54%,
Microsoft
MSFT,
+0.92%,
Nvidia
NVDA,
+2.33%,
and Tesla
TSLA,
+1.33%
— actually cheap? Observe this chart from Dave Mazza, chief strategy officer at Roundhill Investments:

Mazza focuses on the PEG ratio — price/earnings versus growth — that can indicate a company’s true value, and a lower ratio means an undervalued stock. PEGs of tech giants surged at end 2022 to 4.32, but fell in the third quarter to a current 1.68, below the historical average of 1.97, so the Seven “may actually be undervalued when earnings growth is considered,” he writes.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

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