Even amid a meltdown in crypto, DIY traders who came of age after the financial crisis no longer want to play by the old rules. Read on.
Zettler saw his account balance rise to US$50,000 before falling to US$35,000 when a bet went sideways. He sold US$20,000 of shares and paid his college tuition fees: “I got lucky as heck,” he said.
In recent months, a combination of inflation and rising interest rates have shaken the cryptocurrency markets. Crashing coin prices and the high-profile bankruptcies of crypto lenders and hedge funds have exposed the dangerous practices that flourished in the riskiest areas of the market. The question now is whether the younger DIY investors will retreat.
Rent rises have outpaced income growth in most U.S. states since 2001, according to estimates by the Center on Budget and Policy Priorities. And inflation has pushed the cost of living higher in recent months. As low interest rates and heavy debt became a fact of life, relationships with risk changed, experts say. Young investors are less likely to approach speculative financial products as investments with underlying value.
Gary Stevenson, a 35-year-old former trader and financial education campaigner from east London, is one: “My dad never went to university. He worked at the post office for 35 years and could raise three kids and pay off … he has a comfortable retirement,” he said. “That is off the table for most young people now. It’s created a bit of a panic.”Article content
The introduction of commission-free trading in stocks in the run-up to the pandemic added momentum to lottery-like investing behaviour. In 2015, the zero-commission brokerage Robinhood Markets Inc. was launched, promising to “democratize” financial markets. Four years later, almost every U.S.-based broker had eliminated commissions for equity trading. Robinhood’s game-like app allows customers to sign up and start trading stocks on their phones within minutes.
Young men in particular have been attracted to this kind of moonshot investing. The vast majority of cryptocurrency investors are men and more than 90 per cent of trades in GameStop and AMC were made by men during the peak of the meme-stock frenzy, according to the United Kingdom brokerage Interactive Investor Services Ltd. Experts say one reason these investments are treated like casual bets is because the brokerage apps feel like gambling platforms, only without the regulatory guardrails.
The under-25s are twice as likely to turn to social media for financial advice than any other age group, and more than three times as likely to do so than to seek help from a professional, according to a survey by U.K. advisory OpenMoney Adviser Services Ltd.
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