Younger investors feel most bullish about investing
James McManus, Chief Investment Officer at Nutmeg, comments on the FCA’s research paper on younger investors taking on big financial risks.
“The regulator is right to differentiate the practices of responsible investment firms helping people to achieve their financial goals with a long-term investing mindset, from those unscrupulous firms promoting high-risk investments to investors for whom they are unlikely to be suitable.
“In truth, what we’ve seen with the meme stocks’ saga and the extreme volatility in cryptoassets are timely examples of the perils of a short-term approach to investing driven by hype. These moments should act as a clear warning that market noise is often just that and if something sounds too good to be true, it probably is.
“As many younger investors will likely have lost a great deal through this sort of short-term, speculative stock picking - which we see as more akin to gambling than investing - the regulator has taken action with its new campaign warning consumers of the potential harm of high-risk investments.
“Our recent research has shown that younger investors feel most bullish about investing, with 60 per cent of 25-34-year-old UK investors having moved more money into investments since the start of the pandemic. With younger investors feeling better off and more financially confident now than pre-pandemic, it’s vital this increased appetite translates into the right kind of investment activity.
“Without timely intervention, the recent hype around highly-volatile assets will likely reinforce the false stereotype that investing is primarily about short-term stock picking. It’s crucial that the industry and regulators work hard to make sure that younger investors don’t lose sight of longer term financial goals and the investment strategies that will allow them to achieve these.”