There is a “seismic shift” happening in the way Americans are investing, as younger generations ditch the strategies of their parents for innovative and future-facing new ones, according to a new report from financial markets insights provider Investors Observer.

From data through mid-2025 from fund, performance dashboards and direct investor surveys, a clear generational divide emerged between younger and older investors’ preferences.

According to the data, Generation Z and Millennials are holding cryptocurrency exchange-traded funds, fintech, AI and gaming, while Gen X and Baby Boomers stick to their “slow-and-steady script-health-care, real estate and broad-market index funds.”

The study found that ETFs have become popular with the younger generations, aided in part by automatic enrollment, with 75% of Gen Z and 81% of Millennials reporting that they hold ETFs, compared with 60% of Boomers.

Further, Gen Z’s preference for crypto and digital asset ETFs has more than doubled from 2023, increasing to 59% in 2024 from 26% in 2023. Millennials’ adoption of these products also made a noticeable jump, to 57% from 30%.

Predictably, Boomers remained cautious about these products, with only a small increase to 13% from 7%. According to the report, this generational divide makes it clear that “young investors are much more interested in high-risk, high-reward, and innovative sectors, while older investors are less likely to prioritize them in their retirement plans.”

Fund Performance

According to the report, the data show reason behind younger investors’ desire to take risks. For example, YieldMax MSTR Option Income Strategy ETF, which many tech-leaning younger investors use, delivered an astronomical 105.98% return over the past year.

Similarly, Kinetics Market Opportunities, a mutual fund which allocated capital to bitcoin and energy assets, delivered a 35% return over the past year, and its sister fund, Kinetics Paradigm, delivered 27%.

Sam Bourgi, an Investors Observer finance analyst and researcher, said in a statement accompanying the data that he does not believe that young investors are acquiring these funds just to be “flashy” or to chase trends.

“It’s about cost, too,” Bourgi said in the statement. “Most younger investors keep fees ultra-low by favoring ETFs. Over thirty years, that 1% in fees you didn’t pay compounds to an enormous advantage.”

For Gen X and Boomers, sticking to their usual funds brought in moderate gains. Real estate index funds brought in 4% returns, while health care ETFs saw 17% returns, according to the report.

Risks and Rewards

Although Gen Z and Millennials are slated to see future growth, their investment strategy also has hazards, according to the report. More aggressive bets may yield greater rewards, but there is also the chance of major losses.

The advantages that come with younger investors’ investment strategy, such as lower average fees (due to greater ETF adoption) and stronger sector diversification (with notable allocations to emerging technologies), also come with “counter-balancing risks, including higher volatility and potential market timing challenges,” the company stated.

Conversely, older Americans who prefer stable, large funds could miss out on the fast growth associated with alternative assets, “especially if higher mutual fund fees pile up and eat into slow-and-steady gains.”