The Rise of Young Investors Taking Big Risks

By now, most people have heard about the GameStop saga and its ensuing (and unexpected) battle between Reddit users and Wall Street. Though the war is seemingly over, the aftermath’s effects are still rippling through the stock market due to a rise in young, thrill-seeking investors.

Young Investors

The Wall Street rebellion has given way to a new type of investor – those that are young and willing to take significant financial risks, basing their strategy on emotions rather than educated tactics. The excitement of investing drives this demographic and the status that comes with boasting about big deals.

Multiple investors had admitted to selecting options purely based on memes and the hype they had heard about them. This is because Youtube and social media heavily influence them. Instagram and TikTok are home to many financial and investment influencers, which continue to propel the trend.

Rising Number of Risk Takers

The Financial Conduct Authority (FCA) warned that the rise in young risk-takers is finding its way to Europe, causing concern among UK regulators. Among the fears is that they are being encouraged to buy high-risk products that are not suited to them. Also, should the markets take a turn for the worse, these newbies, who often take a speculative approach, are not equipped to handle the change.

The FCA was looking to understand the attitudes and financial resilience of what they dubbed “self-directed investors.” This is in an effort to create a campaign addressing the need to choose investments suited to your requirements while pointing out the uncertainty of high risk, high return investments.

Trading via Technology

Many traders utilise various apps and platforms that buy stocks and mine cryptocurrencies on their behalf. This is likely to be the result of a generation that relies heavily on technology throughout their general day-to-day. And it is not just used for the act of trading. Investor tips are gathered from social media, rather than the traditional channels like newspapers and sites, so it is a natural sequence of events to move directly from Instagram to a trading app after discovering a new tip.

Also, since young traders are driven by the thrill that comes with taking a risk, it offers a similar kind of instant gratification as social media, further explaining how these platforms seem to go hand-in-hand for users. Hashtags such as #investing and #finance feature throughout millions of posts, enticing users along the way.

Warning Signs

At the moment, these are preliminary observations concerning what is deemed to be trading with a lack of industry awareness. Therefore, advice is to be issued to help prevent damaging losses. Other concerns include that these young investors may be looking to recreate the GameStop saga and that the possibility of such an event reoccurring is not unlikely. What is for certain, though, is that there is an uptick in thrill-seeking investors involving themselves in the market, who follow a much different approach to traditional investors.

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