In the past year we have seen nothing short of a retail investment revolution. The investment platforms recorded a record number of new customers, with the average age of investors trending downwards. Young people are discovering the world of investing for the first time and how they get started. Whether it’s fighting the hedge funds in the US or bringing the green investing agenda closer to home, our generation is shaping the dynamics of stock markets in very real ways.
Millennials and Gen Z are often touted as socially and environmentally conscious investors, at least when compared to older people. But we are not angels. The data suggests we are increasingly interested in so-called meme stocks like Tesla, with its questionable governance, and energy-intensive cryptocurrencies like Bitcoin.
Many young people avoid traditional advice such as “Spread your risks”, “Invest long-term” and “Do the basics”. You can jump on band wagons triggered by the lightning speed of social media and Enfants awful like Elon Musk, who can make or break a fortune with a tweet. Research by the Financial Conduct Authority last month found that novice investors were more likely to follow trends, gut instincts, and cocky influencers than conventional investment science.
The traditional financial sector is starting to worry that the next generation will be lost to get rich quick and develop a gambling mentality. I share this concern. But we need to understand the phenomenon of young investing instead of being quick to judge.
First, who can blame young people for making high returns? Given the tough economic deal they had already done before Covid and the quantitative easing that is enriching senior homeowners at the expense of young renters, it’s no wonder young people are looking to poor savings rates and want to do better. They believe that investing offers an opportunity to grow your money in real terms. Your instinct is spot on – you just need to channel it more sensibly.
And to be fair, we don’t teach young people about investments and pensions. That’s why I wrote my new book – to raise a generation that is curious about the stock market. Otherwise, young people priced out of financial advice simply go online to get their information, often from snake oil vendors telling them what to hear.
“Young people priced out of financial advice simply go online to get their information, often from snake oil vendors, telling them what they want to hear.”
We will all make mistakes on our investment journey. What matters is to learn from them. But we also need to provide young people with information that will enable them to spot fraud and develop into patient, thoughtful investors.
When you start out, look for ways to manage your risks, such as: B. through diversification. Only invest directly in companies if you can get involved in research. When you’ve put your portfolio together, leave it alone, save for some balance and profit-taking here and there. If something sounds too good to be true, it is.
Learn How To Manage Your Investing Brain. Over-trading, exposure to a volatile asset or two, panic in falling markets … all of these can lead to serious financial and mental problems. Research has shown that traders who suffer large losses early in their careers have symptoms of post-traumatic stress disorder.
The young investment revolution is to be welcomed. But we need to provide better help and guidance to young people so that they don’t have to learn how to invest the hard way.
Iona Bain is the author of Own It! How our generation can invest our way in a better future now.