2 Risky Investments Gen Z Is Making in 2026 — and Why Losses Could Add Up
With a longer time horizon on their side, younger investors can afford to take on more risks than those closer to retirement -- but when is it a risk and when is it a gamble?
A new Northwestern Mutual study found that Gen Z and millennials make up the largest proportion of Americans who are investing in -- or are considering investing in -- high-risk speculative assets in 2026. Nearly one-third of Gen Z (32%) are interested in investing in cryptocurrency, compared to 24% of Americans as a whole. And an additional 32% are interested in sports betting and prediction markets -- nearly double the 17% interest for the overall population.
Here's a closer look at why Gen Z is willing to take on risky investments, and why this could be setting them up for big losses.
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Why Crypto Appeals to Gen Z — and Why It's So Risky
Cryptocurrency is a risky investment for several reasons.
"First, prices are extremely volatile and can swing wildly in short periods of time, potentially wiping out money needed for near‑term goals like a down payment," said Brittney Coffman, associate private wealth advisor with Continuum Wealth Partners, a Northwestern Mutual Private Client Group.
"Second, most cryptocurrencies lack conventional valuation anchors such as cash flows, earnings or productive use, so their price often rests on sentiment and hopes for future adoption rather than fundamentals."
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According to Coffman, there are other risks as well:
Platform and custody risks: "Exchanges can be hacked or fail, private keys can be lost, and smart‑contract bugs or protocol exploits can permanently impair value."
Regulatory uncertainty: "Regulatory and tax uncertainty remains high, and new rules can change accessibility and cost quickly."
It's an oversaturated market: "The market is noisy and concentrated, with social media and celebrity influence capable of driving large price swings, and with many tokens likely to fail given there are thousands that exist."
No proven track record: "Claims that crypto is a reliable hedge or non‑correlated asset have not been proven across economic cycles, so treating it as a dependable store of value is premature."
"All of this is particularly consequential for Gen Z, as the study shows many in that generation feel financially behind and may be using speculative assets to try to catch up," Coffman noted.
Why Sports Betting Isn't a Wealth‑Building Strategy
Sports betting and prediction markets pose different but equally meaningful risks.
"Traditional sports wagering typically includes a house edge, giving the average casual bettor a negative expected return over time," Coffman said. "Outcomes are binary and high variance, producing large swings that are difficult to diversify away."
Gen Zers who see these platforms as just a casual way to make money will be at a disadvantage.
"Information and skill asymmetries favor professional bettors and algorithmic players, leaving casual participants at a disadvantage," Coffman said.
And even if they do place a winning bet, they might never see those earnings.
"Prediction markets can suffer from thin liquidity, disputed resolutions and platform risk if operators change rules or shut down," Coffman said. "Legal and regulatory environments vary by jurisdiction and can change suddenly, potentially freezing funds or limiting access."
Another downside is that this type of "investing" can become addictive.
"The fast feedback loop, social pressure and app-based convenience increase behavioral and addiction risk, encouraging people to chase losses," Coffman said. "It is important to recognize that betting and prediction markets are not reliable, long‑term wealth-building tools."
Why Gen Z Is Drawn to High‑Risk Investments
Gen Z’s interest in speculative assets is driven by a mix of psychological, economic and technological factors. The study found that a large share of younger adults feel financially behind; among those using or considering high‑risk instruments, 80% of Gen Z report feeling behind and believe these vehicles might accelerate progress.
"Younger people also report a planning gap, placing more emphasis on growing assets than on protecting them," Coffman said. "Technologically, Gen Z is native to app‑based finance and social media, where crypto, meme assets and betting are normalized and heavily promoted -- lowering friction and increasing FOMO."
Comfort with alternative financial products such as Buy Now, Pay Later further reduces psychological barriers to experimenting with nontraditional, speculative instruments.
"Finally, macro pressures like inflation and high living costs increase the sense of urgency that drives many toward high‑variance strategies," Coffman said.
How Gen Z Can Limit Losses From Risky Investments
Gen Z seems to be betting big on crypto and prediction markets -- but this isn't a winning strategy in the long term.
"If a person chooses to participate, they should treat these activities as speculative entertainment and put strong guardrails in place," Coffman said.
She recommends doing the following:
Build a financial safety net first: "Shore up financial fundamentals by building an emergency fund, carrying appropriate insurance and paying down high‑interest debt."
Don't invest more than you can afford to lose: "Limit exposure to a small, predefined share of investable assets -- ideally low single digits -- and only risk money you can afford to lose."
Be smart about how you fund your investments: "Never use borrowed funds, credit cards or Buy Now, Pay Later to speculate. Avoid leverage and margin trading."
Be strategic: "Use dollar‑cost averaging to reduce timing risk, diversify sensibly rather than concentrating in a single token or market, and set clear rules for position sizing, maximum annual loss and profit‑taking."
Keep meticulous tax records: "Crypto is taxed as property in the U.S., and frequent trades create taxable events."
Take extra precautions when it comes to sports betting and prediction markets: "For betting, cap total bankrolls, avoid parlays and high‑vigorish wagers, set time and loss limits, and treat it as entertainment rather than an investment strategy. Periodically rebalance and consider harvesting gains from speculative positions back into diversified, long‑term assets."
Talk to a professional: "Consider consulting a financial advisor to help integrate any speculative activity into a broader plan that prioritizes long‑term financial security."
While these steps won't eliminate all risk, they can help prevent you from losing it all.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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