Why is investing successful among young people? Is it a game for them, or do they have enough information to make rational decisions regarding their wealth? How are they informed? Natives of new technologies, they flee traditional banks, inform themselves autonomously on the Internet and embrace neobrokers to manage your wealth and invest in financial products through user-friendly apps, which allow you to trade securities easily. The digital investment platform Scalable Capital, whose largest group of investors (32%) is between 27 and 34 years old, calls this new profile ‘smartphone investors’.
Until recently, investing was a matter for the wealthier classes. In the first place, there was a significant economic entry barrier, but also, once this was resolved, one came face to face with the lack of financial culture and with a series of prejudices about the functioning of the markets and their risks. The new technologies make it possible to overcome both obstacles: the prices of the acquisition of securities have decreased considerably, and the young and not so young have access to all kinds of information on different channels, from their mobile device. Even on social networks like YouTube, where there are very solvent profiles.
During the pandemic, the CNMV confirmed a massive entry of new retail investors in the IBEX 35, and that the age of the new incorporations was lower (especially at the beginning), as well as the volume of the contributions. These data coincided with the arrival in Spain of what are known as neobrokers, digital platforms that facilitate access to the securities markets at lower costs than traditional banks. The confinement would have favored young people, seeing limited your leisure optionsthey were encouraged to invest with just a few clicks, and in the process they were preparing their assets for the future.
Certainly, we no longer need to go to a bank in person to plan our investments. But it is that, in addition, in the case of the new generations, they don’t want to either, because they don’t feel understood by them nor are they ‘on the same wavelength’. The data reflects this: a report by The Boston Consulting Group maintains that traditional banks do not take sufficiently into account the needs of clients regarding autonomy in decisions and digital interaction, and only 9% of investors in investment plans investment want face-to-face advice sessions.
Risk-aware and unenthusiastic
The democratization of investment has not been without controversy. According to Adrian Amorin, country manager in Spain of Scalable Capital, “Newcomers to the stock market have been accused of falling into all sorts of psychological traps, improperly diversifying and pursue popular values on social media”. However, for the expert this vision does not correspond to reality: “Contrary to what we might think, online investors are not only aware of the risks of investing, but rather unenthusiastic”.
The long-term view with investment plans and the diversification of their portfolios with the acquisition of ETFs (which are halfway between stocks and investment funds) would be two other signs that young people invest with a cool head and that his profile is far removed from fans of online betting. “Two-thirds of the money invested through our online broker service flows into ETFs. Among those under 27, the proportion reaches three quarters. In an analysis of our client base, we saw that, above all, young investors invest according to the rules”points out Amorín, for whom these data show that investors who consider themselves inexperienced are even less likely to take risks.
Risk is an inherent aspect of investment, and a good financial education is essential to avoid making mistakes when managing our assets. In this sense, it is necessary for the new players to get involved in disseminating content of interest to their communities. In fact, many fintech are already using their channels to explain in a didactic way the different products and services that can be accessed thanks to the new tools, and how we should manage ourselves in an environment unknown to most until recently.
“It is very important to show newcomers to the capital markets that it is not as complex as it seems. Part of our disclosure is to remove misconceptions, such as that investing is too complicated and therefore only for experts.” Amorin explains.