Stocktake: Survey shows young investors are taking big risks

The perils of amateur investors trading high-risk assets are highlighted in a report by the UK's Financial Conduct Authority (FCA).

The FCA surveyed more than 550 people who were doing or considering self-directed investing, with a focus on those attracted to high-risk, high-return investments such as cryptocurrencies. Worryingly, 59 per cent of inexperienced investors said a significant loss on their positions would seriously impact their current or future lifestyle.

A large majority, 78 per cent, said they trusted their “gut instinct” to tell them when to buy or sell.

Four in 10 said they were driven solely by “emotional and social motivators”, such as the thrill of investing or feeling like “an investor”.

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Respondents tended to be confident, even though many were clueless; indeed, more than four in 10 didn’t acknowledge that “losing some money” was one of the risks of investing.

Ease of use appears to be a significant factor. “I started looking at investment websites like Vanguard, but I felt completely out of my depth, almost like I didn’t belong there,” said one respondent. In contrast, trading apps are “really easy to use”.

Easy to use, yes, but also easy to lose.