Millennials engage as DIY investing boom continues
A survey conducted by automated investment manager – robo adviser – Nutmeg has identified that a new generation of younger investors has emerged from the pandemic – writes Christian Leeming.
Brokers have reported accounts being opened in record numbers in the year since the first lockdown with many being opened by younger investors.
There has been a general increased interest in personal finance and savings in large part because those that have remained on the payroll have had the opportunity to save during lockdown.
Despite some well-documented risky behavior, younger investors have by and large proven to be a pretty sober bunch and have embraced the opportunity to create long term wealth.
The survey found just under half of 25-34 year olds feel financially better off than a year ago while 45% feel more confident about their finances; this is translating into more investments with 60% of the cohort putting more money aside compared to 38% of the population.
In announcing its findings, James McManus, Nutmeg’s chief investment officer said: ‘These shifts in behaviour and attitudes towards investing are particularly significant and represent a huge opportunity for wealth creation – at both an individual and national level.’
Low-cost retail investment platforms have made day trading and DIY investing more accessible to younger generations; of the 2,000 surveyed by Nutmeg, 21% said they are much more likely to make and manage investments themselves since the start of the pandemic.
young investors can ride out short-term volatility and take full advantage of Einstein’s ‘Eighth Wonder of the World’
Overall there has been increased interest in sustainable investing, but the increase in day-trading has caused concerns, including with the Financial Conduct Authority, that young people with little knowledge of investing could be engaging in risky behaviour and facing hefty losses.
Day traders that came together on Reddit sent Gamestop stock soaring last month in what was widely hailed as an attack on hedge funds but also speaks to a wider interest (Wolves in casual clothing take GameStop to the next level >).
Investors are increasingly using social media to help manage their investments; research by behavioural finance experts Oxford Risk revealed 9% of investors regard social media as their most important source of information.
Those that caught the market on the rebound should have fared well in the last twelve months, and the prospect of big gains after such a difficult year definitely has a lure.
However, one of the key attractions voiced by DIY Investor’s community is the feeling of being in control that comes with managing their own money; after such a torrid time, and uncertainty about how the government is going to pay back the £2.1 trillion national debt, there will be comfort for those taking personal control of their financial future.
A survey conducted amongst the community of users of financial information app Finimize, found that the proportion of those investing stood at 60% a year ago, but that has now risen to 80%.
In announcing its findings, founder Max Rofagha said: ‘It’s always a very controversial phenomenon because there’s a lot of noise and there are a lot of people who probably shouldn’t be [investing. At the same time it’s the wrong approach to discard them all. There is a whole new cohort of investors who we see as sticking around.
It speaks to millennials wanting to take ownership of their investments and with the rise in sustainable investing away from passive trackers.
‘This new generation of the casual investor wants to take a very active role in their investments they don’t want to just put it into a robo-adviser or a passive fund.’
DIY investing platform interactive investor found that younger investors were the most successful in terms of their investment returns during lockdown.
With time on their side, young investors can ride out short-term volatility and take full advantage of Einstein’s ‘Eighth Wonder of the World’ Compound Interest 101 – the gift that keeps on giving > on the road to financial independence.