According to the CNBC report, the U.K.’s financial regulator, Financial Conduct Authority, warned Tuesday that thrill-seeking young investors are taking on large financial risks, despite most admitting that significant losses could fundamentally impact their lives. According to FCA, “new, younger, more diverse group of consumers getting involved in higher-risk investments, potentially prompted in part by the accessibility offered by new investment apps.”
FCA identified cryptocurrency as higher-risk investments along with forex.
FCA identified assets such as cryptocurrency, crowdfunding, foreign exchange, and contracts for difference as higher-risk investments. CFDs are a type of instrument used to bet on an investment’s future price without actually having to own the underlying asset. The FCA said the newer “self-directed” investor — people investing on their own behalf — that it had identified skewed more toward being women, under the age of 40, and from Black, Asian, and Minority Ethnic (BAME) backgrounds. The report flagged that this new group was more likely to look at online platforms like YouTube and social media, including Reddit, for investing knowledge, advice, and tips.
Young investors are “enjoying the thrill of it.”
In its latest report, the financial watchdog commissioned consultancy BritainThinks to conduct the research, which surveyed 517 “self-directed” U.K. investors from August 2020 through January 2021. Another 45 investors were interviewed in-depth over the telephone, 20 of which then took part in online research to observe their “investing journey.” The report also took into account existing research on self-directed investors to inform the study. The report found that emotional and social motivators, like “enjoying the thrill of investing” and the “status that comes from a sense of ownership,” was solely driving four out of 10 respondents to put money into high-risk, high-return investments.