Retail investor participation set to grow but cryptocurrency crash is top risk for young investors in 2022

• Despite concerns, 56% plan to increase their allocation to the digital asset

• 59% of young investors plan to increase their stock investment allocation despite recent correction

• Tech stocks, WFH, energy and Meme stocks expected to perform best

• Social media remains a key source of information for new investors, with Reddit, Twitter and Facebook the most used

New research¹ conducted on behalf of Saxo Markets UK, the licensed subsidiary of Saxo Bank, the leading fintech specialist focused on multi-asset trading and investment, revealed that retail investor participation in financial markets will continue to grow in 2022, but investors are wary of the risks ahead as markets see a correction. The biggest concern for young investors (aged 18-34 years) is a cryptocurrency crash. However, despite these fears, more than half (56%) plan to increase their investment allocation to the digital asset class, challenging the risk on/risk off setting. An even higher percentage (59%) would increase their allocation to cryptocurrencies if the asset class were regulated.  

Inflation and a more widespread stock market bubble leading to a correction were second and third respectively in terms of biggest concerns for young investors. Just a little over one in ten (13%) were concerned about the impact of the pandemic risk on their investments.

Despite the recent stock market performance, three in in five (59%) young investors still plan to increase their stock investment allocation this year. Nearly half (46%) believe tech stocks will perform best despite well-known shares such as Netflix losing 33% of its value, Amazon 16%, Microsoft 12% and Alphabet 10%². WFH stocks, energy stocks and Meme stocks were listed second, third and fourth respectively in terms of investment performance expectations. 

Of the young adults surveyed, most of them are drawn to investing to earn extra income followed by securing their long-term financial future. One in seven (14%) cited fun as the reason for investing. 

Young investors continue to use social media as their primary source of information, followed by news sites and forums. Just one in ten are influenced by their peer group. When asked more specifically, Reddit, Twitter and Facebook were seen as the most important media platforms for investing in 2022. Just over one in ten (12%) suggested it was Instagram, despite the increasing use of influencers to lure retail traders. 

Commenting on the research, Charles White-Thomson, CEO of Saxo Markets UK, said: “One year on from the events which saw the rise of the so-called Reddit army of traders, a quieter but more sustainable cohort of younger investors is emerging which will shape the future of investing for years to come. Many such investors have, however, not witnessed a market crash or a major financial crisis, so it is critical that alongside their increased investment activity, they not only seek credible sources of investment information but also look to diversify their holdings to ensure that any recent gains are protected rather than wiped off. 

“Platforms such as ours are investing heavily not only in terms of improving the user experience, but also in encouraging investors to think across different scenarios that will impact their performance. The mantra that markets always go up may no longer be true in 2022 so diversification and risk management will be key.”

Source:

¹ Research carried out by Ipsos with 250 young investors aged 18 – 34 years in January 2022|

² As of 23rd January 2022