Almost a fifth of Gen-Z investors have ventured into the markets over the past year, with 9% starting after the GameStop saga, a survey has found.
The survey by F&C Investment Trust, part of BMO Asset Management, comes as UK regulators scrutinise the role of social-media platforms in shaping investment trends, particularly among young savers.
US retailer GameStop’s share price jumped more than 2,700% after a band of traders from the online forum Reddit led a campaign to push the stock upwards and squeeze short-selling hedge funds.
The saga, which also saw online chat rooms spiking the share prices of Finnish telecommunications company Nokia and US theatre chain AMC Entertainment, dominated headlines earlier this year.
During the market turbulence, 62%, of Gen-Z investors — those aged between 18 and 23 — decided to invest in “Reddit stocks”, F&C’s research found.
In March, the Financial Conduct Authority released research that found that “a new, younger, more diverse group of consumers” are taking on bigger financial risks, egged on by messaging “that often appeals to ‘fear of missing out’”.
Sixty-three percent of those who had been investing for less than three years use YouTube, Instagram, Twitter or TikTok to make stock decisions, the City watchdog found.
More than half of Gen-Z investors decided to follow actively investment guidance shared on platforms such as TikTok, Instagram and Twitter, the survey of 500 Gen-Zs and 250 Gen-Z investors by F&C found. The survey took place in the UK from 1 to 13 April.
Andrew Bailey, former head of the FCA and now governor of the Bank of England, wrote in a 22 March letter to the Treasury Committee that he sees “strong resistance” to extending online safety laws to financial services.
“The lesson here is that the online world is not subject to the same legal duties as the more traditional media,” wrote Bailey. “There is consequently no adequate shared responsibility with online service providers, and consumers are at much greater risk. This is a serious problem.”
January’s market volatility prompted 49% of Gen Z investors to put more money into markets. The same percentage claimed they were “successful” in making money during the volatility, but 29% were not so lucky and lost money.
“GameStop has no doubt prompted more young people to consider investing, but investing shouldn’t be viewed as a get-rich-quick scheme,” said Ross Duncton, managing director and head of direct at BMO.
“As with all investments, young investors should be encouraged to make decisions based on their longer-term goals and in line with their risk appetite, remaining mindful that their capital is always at risk when investing.”
“That said, it has heralded a new generation of enthusiastic and engaged investors, which is a positive outcome, particularly when cash savings rates are so low,” added Duncton.
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