Almost 780,000 Gen Z investors have entered the market in the past two years, but many are starting with cryptocurrencies rather than diversified funds or pensions.

Vanguard estimates that more than a third (37 per cent) of Gen Z investors began investing during this period, compared with 11 per cent overall. One in three chose cryptocurrency as their first investment, ahead of individual company shares or investment funds.

Separate GWI research suggests this appetite for hands-on investing may be developing at the expense of retirement saving.

Gen Z ownership of gold increased by 50 per cent over six years, while ownership of stocks and shares rose by 45 per cent and crypto by 43 per cent. Pension ownership among the age group fell by 10 per cent over the same period.

The figures point to a financially engaged generation drawn to assets that feel accessible and under their control. The danger is that short-term excitement distracts from the employer contributions, tax relief and decades of compounding available through a workplace pension.

Why risky assets are winning attention

Investment apps make it possible to buy cryptocurrency, gold or part of a share within minutes. Social media adds stories of rapid gains, while pensions can feel remote and difficult to understand.

Sarah Coles, head of personal finance at AJ Bell, said: “FOMO can hit hard at times like this, especially when money is tight and the thought of getting rich quick is hard to resist.”

Those gains can disguise the difference between investing for decades and speculating on an asset whose price may move sharply.

Coles said: “It’s incredibly difficult to time the markets - especially when the price is based largely on so many other speculators - so you could end up buying and selling at the worst possible times and losing significant sums.”

Individual shares carry concentration risk too. Their performance depends on one company, while a diversified fund can spread money across hundreds or thousands of businesses.

What pension savers stand to lose

Many workers may not think of their pension as investing.

Anna Macdonald, investment strategy director at Hargreaves Lansdown, said: “On the other hand, people may already be investors, but not know it - according to an HL survey, only 47 per cent of people actually know their pension is invested in the stock market.”

A workplace pension usually invests contributions in funds holding shares, bonds and other assets. It also comes with financial help unavailable through an ordinary investment account.

Coles said: “Pensions have huge advantages from day one, because in a workplace pension, when you pay in, your employer will pay in, and the government will top it up with tax relief.”

Under minimum automatic enrolment contributions, an employee usually pays five per cent of qualifying earnings and an employer pays at least three per cent. For a basic-rate taxpayer, tax relief means every 80p paid personally becomes £1 before the employer contribution is added.

“If more people understood that they could basically double their money in a day, pensions might get more love,” Coles said.

AJ Bell calculated that somebody paying £100 a month into a pension from age 25 to 68 could build £238,509, assuming annual growth of seven per cent and charges of one per cent.

Waiting five years would reduce the projected pot to £172,870. A ten-year delay would cut it to £123,820. These are illustrations rather than guarantees, but they show how difficult it can be to recover lost time.

Ian Futcher, financial planner at Quilter, said: “Pensions are ultimately long-term savings vehicles. There is a good chance you won’t need to touch this money for 30, 40 years or perhaps even longer.”

How to combine control with security

Younger savers do not have to choose between a pension and investments they can access earlier.

The first priorities are usually clearing expensive debt and building an emergency fund. Workers should then consider paying enough into their workplace pension to receive the full contribution available from their employer.

Money for goals at least five years away can also be invested through a Stocks and Shares Isa, which can be accessed before retirement. A diversified portfolio of funds can form the core, with a smaller amount reserved for individual shares, gold or crypto.

Macdonald said: “If people do want to allocate some of their investment pot to a more speculative investment, they should make sure it’s only a small portion and that they fully understand the risks before going ahead.”

Coles added: “If they’re really keen to dabble in risky investments, they should be prioritising those long-term investments, but they can still put a small proportion of their cash into these speculative assets - on the understanding they could lose it all.”

Gen Z’s willingness to invest early could become an advantage. It becomes a retirement trap when control and excitement replace pension benefits that are difficult to recreate elsewhere.

When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.