“The VirusCasedemic birthed a new era for financial markets, 1 with of younger, more powerful and influential retail investor”— Paul Ebeling
The young men and women flush with extra cash and more free time as lockdowns ensued, started learning about and betting on stocks showing Wall Street a yr of reckoning and changed investing forever.
Our outlook is that young retail investors have no plans to stop. In fact, 20- and 30-something anni investors want to allocate more of their money to riskier investments in pursuit of greater returns as markets rise towards records.
A recent survey of retail investors conducted by UK-based investment management firm Schroders found that younger age groups comprised a significant portion of respondents who reported plans to be more active in volatile, higher-risk sectors, asserting that people do not seem to be more Bullish than before. Instead, due to volatile conditions, they know they have more to gain.
The study found a number of people exhibiting riskier investment behavior as a result of the pandemic, with one-third of retail investors expressing plans to invest in high-risk assets, including ones they haven’t previously considered. Of respondents in the study who appeared to have a greater appetite for risk, 44% were between the ages of 18-37.
Younger people have longer in terms of their investing horizon until they retire, so on the one hand, investing in riskier assets makes a lot of sense for them.
In its study, Schroders found that the younger investor bracket had more diversified portfolios across various sectors and asset classes, especially favoring industries deemed to be more volatile, such as electric vehicles, biotechnology or cryptocurrencies.
Investors between 18-37 years of age reported significantly higher return expectations than their older counterparts, though Schroders indicated those projections had more to do with the younger age group having a significantly more diversified portfolio than the suspected idea that older investors have more realistic expectations.
Specifically, internet and tech securities held the greatest appeal among retail investors, and particularly for the 18-37 age bracket, with 61% in this group investing in internet and technology stocks or funds in the past year. Cryptocurrencies were the next most popular for the 18-37 age group at 51% reporting that they have allocated to the digital assets.
Risk is the price investors pay for a chance to reach their aspirations, as it is generally the case that, especially for young people, aspirations are higher than their current position, so they are willing to take risks.
Schroders’ study, which surveyed 23,950 people who invest across 33 locations around the globe found that 33% of respondents, the group that outlined plans to foray into more high-risk investments was sizable, almost half of survey participants said they will put “more” or “much more” money into general savings or low-risk investments, with those in the younger cohort among the 46% who intend to put more towards savings and 46% in low-risk investments.
Excess savings and more time to experiment with investing contributed to the more active retail investors that emerged in the past 1 to 2 yrs, but we believe that as the pandemic winds down and people begin to socialize and spend money again, perhaps more young investors will make more time for active trading. Many becoming millionaires, some billionaires!
Have a happy, prosperous weekend, Keep the Faith!