While just ten years ago teenage traders may have been a rarity, cryptocurrency platforms and the various apps have made investing more accessible to people of all ages.
On Thursday, AJ Bell PLC (LON:AJB) said growing numbers of younger people are joining the platform to open pensions and ISAs, just a few weeks after competitor Hargreaves Lansdown PLC (LON:HL.) noted the average age of its clients fell to 37 from 45 in eight years.
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Fellow investment service interactive investor said that younger investors outperformed older investors for the whole of 2020, but the roles have reversed in the first quarter of 2021.
“Yet our youngest adult customers are still outperforming all other generations over the past year, and the past fifteen months too,” commented chief executive Richard Wilson.
“They were perhaps boosted, for now at least, by having the highest investment trust exposure, which represented 35% of the median average portfolio amongst 18-24-year-olds. While diversified technology holdings were popular, individual tech stocks were hard to find amongst this age group, at least amongst top ranked holdings, this illustrates how difficult it is to generalise about investors.”
Clash of generations
But different generations often come together when discussing investments and exchanging opinions – which can be fruitful for some.
“My most profitable trade to date happened because my 13-year-old brother kept talking about a video game he and every kid at his school were obsessed with,” Conor Houlihan, a 29-year-old living in Brighton, told Proactive.
“This keen interest meant I looked into the company responsible for creating it and found that no analyst was factoring in the success of this game into their earnings forecasts. As a result I invested heavily in the stock and then it jumped 20% after earnings. I brought my brother an HTC Vive to say thanks!”
Houlihan works in recruitment but is also a ‘Popular Investor’ on trading app eToro, through a programme where successful users share their expertise, and seemingly in his family.
“My mum listened to me and a few years ago bought bitcoin on my recommendation – which has turned out to be a very profitable decision. As a result, she trusts my outlook on societal trends, and regularly calls me to discuss investment ideas – such as space exploration or driverless vehicles,” he added.
It is commonplace for families of retail investors to exchange views and potentially influence each other.
“I talk to my kids and discuss investments and the economy with both my parents,” Alexandra Wolff, a 48-year-old self-employed Colorado resident, told Proactive.
“My dad wanted me to take over investing for him, but I don’t want the responsibility – if I lose my own money, that’s one thing, but I don’t want to double the loss.”
“Since [my mum] is a realtor, we’re always watching the real estate market. I tell both of them what I’m learning, which is where our discussions start. We might disagree on some things, but are generally on the same page. I’m teaching them about the economy, which is the number one thing to understand,” Wolff added. Both her parents are 74.
Mind the risks
Education is key, experts say, after a recent report by the Financial Conduct Authority (FCA) showed that new younger, more diverse group of consumers are getting involved in higher-risk investments, potentially due to the accessibility offered by new investment apps.
The research found that for many investors, emotions and feelings such as enjoying the thrill of investing, and social factors like the status that comes from a sense of ownership in the companies they invest in, were key reasons behind their decisions to invest.
“We are worried that some investors are being tempted – often through online adverts or high-pressure sales tactics – into buying higher-risk products that are very unlikely to be suitable for them,” said Sheldon Mills, executive director of consumer and competition at the FCA.
“We want to make sure that we encourage the ability to save and invest for lifetime events, particularly for younger generations, but it is imperative that consumers do so with savings and investment products that have a suitable level of risk for their needs. Investors need to be mindful of their overall risk appetite, diversifying their investments and only investing money they can afford to lose in high-risk products.”