Impulsive trading, led by retail investors, appears to have gotten a new lease on life since the start of the global recession as a result of the ongoing coronavirus pandemic. While celebrity issues were prevalent in viral social media trends before, issues related to personal finance and investing seem to be just as popular these days.
This increased interest in financial markets has also spread from workday workers to the crypto space as cryptocurrencies provided a strong price recovery after the recessions that marked the meltdown of Black Thursday on March 12, 2020.
While the interest is evident, some observers are questioning whether the new generation of retail investors is knowledgeable enough to invest in risky assets. But has personal finance and investment management become a new fashion trend?
COVID-19: Challenges and Opportunities
Trading apps like Robinhood and Coinbase have recently become the most downloaded ones on the Apple App Store, outperforming popular social media networks like TikTok and Instagram. Given the influence of social media on popular culture over the past decade, investment apps that see the most downloads may indicate interest, especially among young people.
According to a study published by US investment giant Charles Schwab, 15% of current retail investors in America started investing in 2020. In fact, it is estimated that by 2020, the US brokerage industry has added 10 million new customers, including retail. Robinhood makes up more than 60% of the total.
The retail investment boom in 2020 can be attributed to two factors: market volatility and coronavirus disruption. As the global economy is performing poorly, governments have sought to stimulate growth and recovery by injecting massive cash into stimulus packages.
Millennials and Generation Z make up the majority of the budding investor class created in 2020, according to a survey by Charles Schwab. In fact, millennials accounted for more than half of the participants entering the asset market in the midst of the COVID-19 pandemic. Jonathan Craig, Executive Vice President and Head of Investor Services at Charles Schwab, told Cointelegraph:
“We have seen tremendous growth and individual investor participation over the past year as a result of lower trading costs, new products and services aimed at increasing accessibility and accessibility, and investment opportunities provided by market fluctuations.”
Perhaps fearing inflation and monetary easing, some individual investors seem eager to provide an appropriate hedge against economic uncertainty. In an interview with Cointelegraph, Jay Howe, CEO of cryptocurrency giant OKEx, described the COVID-19 pandemic as a major catalyst for current retail investment, adding:
The pandemic may have accelerated cryptocurrency adoption as the Federal Reserve pumped money into the market en masse last year to bail out the US economy. […] We see this with the emergence of more platforms giving private sector investors direct access to equity investment, democratization of the investment space and more power in the hands of the people. ”
Coronavirus continues to have a major impact on personal finances, from low wages to land or even job losses altogether. As such, it may not be surprising to see more people being incentivized to create income from crisis outside of the traditional 9 to 5 structure.
Adds cryptocurrency to the mix
As mentioned earlier, Robinhood accounted for more than 60% of new investors added by US brokers in 2020. This metric puts the retail platform in the right position for identifying entry-level investment trends over the past year.
According to a blog on the company’s website in early April, the trading platform said clients are leading the front line of demographic changes in the financial markets. In the aforementioned review by Charles Schwab, the investment giant called this new class of investors a “generation investor,” or first general.
The average age of the first generation is 35, which in turn puts Millennials and Generation Z at the center of this demographic shift in investment. Several studies have also ranked this age group as the most interested in cryptocurrencies, Howe said:
“Cryptocurrency is perhaps one of the first financial tools to capture the attention of a millennium and have the potential to energize the market further. From popular TikTok accounts to memetic crypto marketing, these communities and their ability to take action provide a new phase for users. Behavior toward alternative currencies.”