Younger investors join the DIY investing boom
Survey conducted by investment manager Nutmeg identified that a new generation of younger investors has emerged from the pandemic – writes Tabitha James.
Brokers reported account openings in record numbers in the year since the first lockdown, many by younger investors.
There has been increased interest in personal finance and savings in large part because those that have remained on the payroll have been able to save during lockdown – up to £180bn.
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 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.
James McManus, Nutmeg’s CIO 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 platforms have made DIY investing more accessible to younger generations; of the 2,000 surveyed, 21% said they are much more likely to manage investments themselves since the start of the pandemic.
There has been increased interest in sustainable investing, but increased day-trading has caused concerns, including with the FCA, that inexperienced young people could be engaging in risky behaviour and facing hefty losses.
Traders came together on Reddit and 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 shape their investments; behavioural finance experts Oxford Risk revealed 9% regard it as their most important source of information.
Those that caught the market on the rebound should have fared well;the prospect of big gains after such a difficult year definitely has a lure.
DIY investors value the feeling of control that comes with managing their own money and with uncertainty about how the government is going to pay back the £2.1 trillion national debt, there will be comfort for those taking personal responsibility.
Financial app Finimize, found the proportion of its users investing had risen to 80% from 60% a year ago; founder Max Rofagha said: ‘It’s a controversial phenomenon because there’s a lot of noise and a lot of people who probably shouldn’t be investing. At the same time it’s wrong to discard them all. There is a whole new cohort of investors who we see sticking around – millennials taking ownership of their investments and a rise in sustainable investing away from passive trackers.
‘This new generation of investor wants to take an active role; they don’t want to just put it into a robo-adviser or a passive fund.’
DIY platform interactive investor found younger investors were its most successful during lockdown.
With time on their side, young investors can ride out 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.