Herd Mentality, FOMO Among Biggest Risks for Gen Z Investors, Experts Warn

Young Investors Face a Test of Patience as Digital Tips Multiply

For Gen Z, a wider stream of investment information can open doors—but it can also amplify peer pressure, risky bets and costly attempts to time the market.

More information does not guarantee better decisions

Young investors can access financial information more easily than earlier generations, but that does not automatically make their decisions more informed. At the Business Standard BFSI Insight Summit 2026 Smart Investor Arena, wealth experts identified fear of missing out, peer pressure and the pursuit of quick profits as major risks for Gen Z investors.

Rajesh Saluja, chief executive and managing director of ASK Private Wealth, said social investing habits have persisted across generations, but now operate at a much greater scale. Tips from friends about stocks, cryptocurrencies or developments in artificial intelligence can spread quickly. Acting on a tip without doing independent research, he warned, is closer to taking a punt than making an informed investment.

The distinction matters because a popular idea can feel credible simply because it is widely discussed. But popularity does not establish whether an investment is suitable, or whether an investor understands the risks. For retail investors, a pause to examine the reasoning behind a decision can help separate a considered choice from a reaction to what others are buying.

DIY investing needs a filter for trust and risk

Srikanth Subramanian, co-founder and chief executive of Ionic Wealth, said the way investors decide whom to trust has changed. Gen Z may value people who bridge information gaps and provide timely access to financial information. That shift has supported do-it-yourself investing and community participation, but can also encourage herd behaviour.

A further risk is that a constant flow of ideas can draw investors towards unfamiliar areas, including cryptocurrencies and other alternative investments, while away from equity investing. The experts’ warning was not that every alternative investment is unsuitable, but that investors should avoid putting money into products they do not fully understand. Information is useful only when investors can assess its source, purpose and relevance to their own decisions.

Market declines test the resolve to stay invested

The advice to invest for the long term is being tested by a market decline that has shaken the confidence of some investors who entered equities in the last two years. The Sensex and Nifty were down 14–15 per cent year to date and almost 8 per cent from their 2024 highs, according to the information discussed at the summit.

Subramanian said market declines are part of investing cycles and pointed to recoveries after past crises, including the dot-com bubble, the global financial crisis, the taper tantrum and COVID. The timing and extent of a recovery can differ, however, so historical recoveries are not a guarantee of when markets will rebound. How investors respond to volatility can influence whether they remain aligned with their long-term plans or make reactive decisions.

Compounding rewards consistency, not market timing

Saluja cited annualised equity index returns of around 12–13 per cent over the past 20 years, while noting that much of the return came from a relatively small number of days. The point for investors is that attempts to step out of the market and re-enter at the right moment can carry a cost: missing a limited number of strong days may affect long-term outcomes.

Starting early can give investments more time to benefit from compounding, but that does not mean every investor should increase exposure whenever markets fall. Saluja said raising systematic investment plan contributions or other investments during declines may suit people with a long horizon and the financial capacity to take risk. The condition is important: the approach should be limited to money that can remain invested for the long term.

Key Highlights

• Experts flagged FOMO, peer pressure and quick-return expectations as key risks for Gen Z investors.
• Following a stock tip without research can turn investing into a punt rather than an informed decision.
• Easy access to information and investing communities can also reinforce herd behaviour and exposure to unfamiliar assets.
• Market declines may offer opportunities, but increasing investments is appropriate only when the investor has a long horizon and can bear the risk.
• Experts urged young investors to stay focused on patience, quality equities and the potential benefits of compounding.

Investor Note: Gen Z investors can use greater access to information to make more considered decisions, not to chase every popular trade. Understand an investment before committing money, maintain a long-term perspective and take market risk only to the extent your financial circumstances allow.