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What is fuelling the millennial investing boom?

13/05/2021

More and more younger people are entering the investment market – but what are they investing in, and why are they investing now? To answer these questions, the Financial Conduct Authority teamed up with independent insight and strategy consultancy, Britain Thinks. The survey results led to the creation of a report – Understanding self-directed investors – which you can read in full here.

The role of technology
Technology appears to have played a role in attracting younger investors in two different ways.

The first is the way in which this group gains information about investing. The rise in the number of influencers focusing on the financial sector, as well as the increase in investment-related content that can be found on channels like TikTok, YouTube and Instagram, is creating “often bite-sized, catchy and engaging content” which is attracting new audiences.

Investment apps are also proving popular amongst new investors who are younger and more technologically-minded than some of their older counterparts. Apps like FreeTrade, Crowdcube and Trading 212, says the report, have taken away many of the barriers to entry for this group, giving them an easy-to-use route into the market with no or low fees.

The dangers of this new approach
However, the use of investment apps brings with it a greater potential exposure to investing styles that can be higher in returns, but also significantly higher in risk. Through such platforms, younger groups who are new to investing are being exposed to cryptocurrency, CFDs, forex and investment-based crowdfunding. The research also reveals that younger investors can be more driven by excitement and thrill, and see certain methods as “gambling” rather than “investing”. With only 41% of newer self-directed investors believing that there is a genuine risk that they will lose some of the money they invested, the report suggests that this group could be at more risk of harm.

As a result of this research, the FCA published new guidance on high-return investments, with the aim of ensuring that those who are lured by these investment types are fully aware of the risks involved.

 

Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.

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