Three-quarters of younger investors say competition with their peers is the reason they invest in cryptocurrencies and forex, according to research by the UK’s financial watchdog.
The Financial Conduct Authority (FCA) surveyed 1000 ‘younger investors’ who had invested in high-risk products and found that it was competitiveness and hype that helped shape their decisions.
Some 76% of those aged 18-40 said they were driven by competition with friends, family, and acquaintances and their previous investments while around 68% of respondents likened it to gambling.
Some 58%, meanwhile, said it was social media and the news that was behind their investment decisions
Only a fifth (21%) would consider holding their most recent investment for over a year, despite 60% insisting they prefer stable returns to investments that fluctuate dramatically.
The majority of those who purchased forex or crypto (57% and 69% respectively) incorrectly believed these to be regulated by the FCA.
Only recently, the FCA warned about the potential risks of buying crypto-assets promoted by social media influencers.
According to the regulator, more than one million UK investors increased their holdings or bought a high-risk investment during the pandemic (April-October 2020).
To help people be better informed the FCA has launched a new GBP11mln five-year campaign, ‘InvestSmart’. that is designed to help inexperienced consumers to make better-informed investment decisions that suit their financial circumstances and attitude to risk.
The campaign will use social media and online outlets, where much of the hype around investment happens, directing them instead to advice on the FCA’s website.
“We are seeing more people chasing high returns, but high returns can mean higher risks,” said Sarah Pritchard, Executive Director of Markets at the FCA.
“We want to give consumers greater confidence to invest and help them to do so safely, understanding the level of risk involved.”
Charlotte Worthington, Olympic BMX champion, said to the FCA: “BMX is about big risk, and big reward [like investing, so] when it comes to investments, I would only take on high risks if I felt like I’d done enough research and I was properly prepared.”