A new generation of younger and less experienced investors has streamed into the market relatively recently, and they differ considerably from older investors in their investment behaviors and attitudes, according to new research from the FINRA Investor Education Foundation.
"The findings show that younger investors — ages 18 to 34 — are more likely than older investors to invest for reasons that include social responsibility, entertainment or social activity," FINRA Foundation president Gerri Walsh said in a statement.
"The data also show that younger investors are more comfortable with using mobile trading apps, relying on social media as a source of investment information and trading higher-risk investments — such as cryptocurrencies, options and so-called meme stocks — even though some of these investors appear to be less prepared for the risks."
The study's findings are drawn from the investor survey component of the FINRA Foundation's 2021 National Financial Capability Study. A total of 2,824 U.S. adults with investments outside of retirement accounts were surveyed between July and December 2021.
Risk-Taking
The survey found that the proportion of investors who began investing in the two years prior to the study, 21%, was nearly as large as the percentage who started in the preceding eight years, 25%.
Younger investors are more likely to engage in riskier investment behaviors. Thirty-six percent reported trading options, compared with 21% of those ages 35 to 54 and just 8% of those 55 and older.
Twenty-three percent of younger investors also reported making purchases on margin, whereas only 12% of those 35 to 54 and 3% of older investors did so.
The percentage of investors who said they were considering cryptocurrencies has increased to 33% from 18% in 2018, and 27% are already invested, up from 12%. Among younger investors and those with less than two years' experience, more than half are invested in cryptocurrencies.
Eighteen percent of respondents said they had traded shares of GameStop, AMC or BlackBerry, popular meme stocks in early 2021. Some 40% of younger investors reported buying or selling shares of these stocks, compared with about 20% of those 35 to 54 and 4% of older investors.
