Gen Z Investors Take Risky Approach to ‘Get Rich Quick’ Investing

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Short and sweet is the point of the game for Gen Z investors who take a risky approach to investing by trying to ‘play the markets’.

Nearly half (49%) of Gen Z investors invest their money for less than five years, putting their savings at risk, according to a new study from Barclays Smart Investor.

More than a fifth (21%) of Gen Z investors say they invest to profit from the market, while 16% plan to “play the markets” to get rich quick.

“It’s great to see an increase in the number of young people interested in investing, but it’s worrying to hear that so many Gen-Zers are looking for a short-term victory, rather than investing long-term through a balanced portfolio.” said the director of Behavioral Finance at Barclays Wealth, said Rob Smith.

“The past year has seen a lot of people entering the market for the first time and, if you’ve done it right, it’s often easy to assume that you can replicate your success in the years to come – but it’s not. always the case. “

Over the past year, younger generations have taken more risks with their investments – 30% of Gen Z have admitted this behavior compared to 18% of 35-44 year olds.

The past year has also seen young investors adopt investing habits that are traditionally viewed as unfavorable.

A quarter of Gen Z investors admit to checking their portfolios more often, and a fifth trade more frequently, while 14% have made more speculative investments since the start of the pandemic.

Mr Smith said it is important for young investors to remember that investing is a long game.

“Just as the markets go up, they can go down and by investing the money you might need in the short term, you increase the chances that you will be forced to sell at a less favorable point in the market and end up with a loss – potentially discourage you from investing again, ”Smith said.

“That’s why one of the golden rules of investing is to try to commit for at least five years – to give yourself the best chance of weathering any downturn in the market.

“We often hear that young investors are drawn to investing for the excitement of the markets – but the ups and downs can be incredibly stressful if they happen too often, so it’s best to sit back and relax. don’t check your wallet too often. “

To get the investment buzz without taking so much risk, Mr Smith said young investors should think about creating a “satellite” portfolio by setting aside a small pot of money to invest in higher speculative investments. high risk while keeping the bulk of the investments in safer and less risky options.

“This means you can still have a little fun and try out different approaches, without taking too much risk,” he said.

ASIC will crack down on “finfluencers”

The COVID pandemic has given way to an influx of new investors, with nearly half a million Australians investing for the first time – many of these young Australians.

With it came a new phenomenon: social commerce, where “finfluencers” (financial influencers) give unmoderated investment advice on social media platforms like TikTok and Reddit.

In a recent Joint Parliamentary Committee hearing, when asked what he thought of reports of social media influencers giving financial advice, ASIC Chairman Joe Longo said stated that this was a “major topic” and an “area of ​​great concern” for ASIC.

ASIC Commissioner Danielle Press added that unlicensed, unlicensed financial and investment advice is something the business regulator is “watching very closely and considering”, especially if the person recommends a product. financial.

“If this is advice and it is not authorized, it is illegal activity,” Press said.

“We would be very interested in this activity. If there is any evidence of unauthorized advice, we would very much appreciate it being referred to us so that we can properly review it as it is illegal activity.”

ASIC’s warning comes after Finance Minister Senator Jane Hume downplayed influencers’ risks at a recent industry conference.

“One TikTok influencer is Gen Z Paul Clitheroe or Scott Pape,” Senator Hume said at the time.

“The TikTok influencer who runs Nokia isn’t that different from the pub guy who wants to tell you all about the great company he’s just invested in, but with a much louder voice.”

However, Paul Clitheroe has been a certified financial planner for decades while Scott Pape has a financial license.

Last year, ASIC also found that amateur daytraders most often lose money when trying to “synchronize the market”.

RMIT keynote speaker on finance Angel Zhong told Savings.com.au that government and social media platforms need to think about how to regulate unlicensed financial advice to protect inexperienced investors.

“To begin with, Fintok influencers should post explicit warnings. Platforms such as Tiktok should post explicit warnings, terms and conditions or disclaimers to those who watch finance-related videos,” said Dr Zhong.

“The government must monitor unmoderated and unlicensed financial advice to ensure the healthy development of a stable financial market.

“This is becoming increasingly important given the large number of young and inexperienced investors in the market.”


Image of Executium on Unsplash


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