Press comment: Younger investors playing with fire according to FCA report

If you are covering today’s FCA warning for younger investors, which shows that younger investors are taking on big financial risks, please see the following commentary from Boring Money.

The Boring Money Online Investing Report 2021* published in February, shows that:

  • The last 12 months saw 950,000 investment accounts opened by new DIY investors
  • The average age of someone setting up their first account was 34, much younger than the typical investor
  • Even prior to the pandemic, investors have been getting gradually younger in recent years. The average age of someone who started investing in the last five years is 40, compared to 59 for those with more experience
  • Younger investors favour platforms with mobile apps offering instant access at any time
  • 11% of younger adults age 18-44 say they hold or have previously owned cryptocurrency, compared to just 3% of those age 45+

 

Boring Money CEO Holly Mackay says:

“Almost 1 million new investors started investing in 2020. Many of these first-time investors were accruing extra cash during the pandemic and spotted an opportunity to invest during a choppy year for financial markets.

“However history tells us that new investors in bull markets can suffer from lack of diversification, backing high-risk investments as opposed to more pedestrian choices.

“Popular choices such as tech stocks or cryptocurrencies may have generated paper profits to date but as the Reddit Army assault on Gamestop highlighted, paper gains can turn into real losses very quickly, sometimes with tragic consequences.

“Investing in just a few stocks or crypto is of course a risky strategy. We all love the concept of picking the next Amazon but in practice it’s very hard for retail investors to make long-term returns from this approach.

“It is a good idea to consider multi-asset portfolios or funds that invest in a basket of stocks in order to diversify your exposure. Some people will still want to keep some trading activity on the side, but at least they haven’t got all their eggs in one basket if one or more of those stock picks turns sour.

“The FCA is right to sound this cautionary note. It is incumbent on the industry to try to truly understand the motivations and fears of these first-time investors and to amend their communications approach accordingly. Nearly 1 in 10 investors has been investing for less than a year. The DIY investor is changing. We need to change the conversation in line with this.”

* A nationally representative survey of 6,698 UK adults aged 18+

 

About Boring Money

Boring Money is an independent research and publishing house which provides information, tips and Best Buy tools to savers and investors. It recently raised £900,000 through crowdfunding, with more than 12,000 weekly readers and investors supporting and engaging with the company. The business conducts regular research with industry providers and UK consumers to track the developing DIY investment market from both the customer and provider perspective. Boring Money holds test accounts with over 25 investment platform providers and also holds regular focus groups and interviews with consumers to ensure regular input and feedback from the user perspective.

Founder Holly Mackay has worked in the investment industry for 20 years and is supported by a team of 12 researchers, analysts and marketing execs. Boring Money is not regulated to give personal financial advice, nor is it regulated by the industry watchdog.

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