The pandemic-era rush of new investors into the market has slowed significantly, according to new research from the FINRA Investor Education Foundation.
Among its findings, the research showed that younger, less experienced investors, in particular, are in need of education.
"They still struggle with gaps in investing knowledge and risk assessment, which can leave them vulnerable to costly missteps," FINRA Foundation president Gerri Walsh said in a statement.
In 2024, 8% of respondents said they had begun to invest within the past two years, down from 21% who began investing in the two years preceding the 2021 survey.
Although the overall proportion of adults with investments held outside retirement accounts was on par with 2021, fewer young adults, men and people of color reported that they owned non-retirement investments in 2024. This largely erased earlier gains, the report said.
The research was drawn from a survey of 2,861 investors with non-retirement investment accounts.
Risk-Taking
The proportion of investors willing to take substantial risks in their portfolios dropped to 8% in 2024 from 12% three year earlier, with the decline larger for those younger than 35: down to 15% from 24%. Still, 34% of investors said they need to take big risks to reach their financial goals, including 62% of the younger cohort.
Moreover, younger investors are likelier to engage in behaviors that may be riskier, including trading options and making purchases on margin, the survey found.
These investment behaviors suggest that many risk-takers are flying blind. The research showed that respondents answered only 5.3 out of 11 investing quiz questions correctly. Questions about margin and short selling had the most incorrect answers, with more than half of respondents answering each incorrectly.
Notably, 75% of those who said they make purchases on margin incorrectly answered the margin question.
Information Sources
The most commonly used sources of investment information and research tools are brokerage firms, cited by 75% of respondents, the research showed. Other sources are financial professionals, 69%; business and finance articles, 67%; and word of mouth, 65%.
Twenty-nine percent of investors reported that they rely on social media as an information source. When asked separately about the social channels they use for investing information, YouTube emerged as the most popular, used by 30% of respondents overall and 61% of those younger than 35.
A quarter of investors said they take investment recommendations from social media influencers, including 61% of under-35s and 57% of those with less than two years of investing experience.
Thirteen percent of investors, and 29% of younger ones, reported that they had bought meme stocks or other viral investments.
Interest in cryptocurrency seems to be waning, although the percentage of those investing in crypto did not change between 2021 and 2024. However, the number of investors who said they are considering either buying crypto for the first time or buying more dropped to 26% in 2024 from 33% in 2021.
Worries about investment fraud have increased somewhat since 2021, according to the survey. Thirty-seven percent of investors expressed concern about losing money because of investment fraud, up from 31%. At the same time, 89% of respondents did not think they have been targeted in an investment scam.
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