Global markets may have calmed following the unprecedented levels of volatility seen during the GameStop saga earlier this year, but it appears that the events have permanently captured the imagination of the UK’s youngest generation of investors.
While the past 12 months have proved seismic in prompting young people to invest for the first time, with 16% of Gen Zs becoming first time investors in this period, new research from F&C Investment Trust highlights the role the GameStop saga played in motivating young adults to start investing, with the developments prompting one in 10 (9%) Gen Zs (18-23) to start investing for the first time, equivalent to just over 455,000 young adults.
Ross Duncton, Managing Director, Head of Direct at BMO, commented, “GameStop has no doubt prompted more young people to consider investing, but investing shouldn’t be viewed as a get-rich-quick scheme. As with all investments, young investors should be encouraged to make decisions based on their longer-term goals and in line with their risk appetite, remaining mindful that their capital is always at risk when investing.
Young investors prompted to turn up the risk factor
The saga not only influenced their initial decision to invest, but their investment approach too, with 62% of Gen Z investors deciding to invest in “Reddit stocks” as the events unfolded.
Instead of scaring off young investors, the significant market volatility increased appetite for risk, as three in five (61%) started considering higher risk investments as a result of the developments. The Reddit-fueled market activity also prompted the same number (61%) to consider investing in asset classes they deemed “unfamiliar” such as cryptocurrencies.
This flirtation with riskier and less familiar assets came hand in hand with young investors increasing the amount of money invested. Half (49%) of all Gen Z investors decided to pour additional money into the markets as a result of the GameStop developments. This was also accompanied by a shift in time horizons for investing, with 57% becoming more interested in investing for short-term profit.
As many tried their hand at beating the markets for the first time, the results were mixed. While 49% were successful in making money during the period of volatility, 29% of investors were left licking their wounds having lost money. The remaining 22% neither lost nor made money.
Social media becomes top influencer when it comes to investing
The market developments also catalysed and cemented the role of social media in driving young people’s investment decisions.
As a direct result of the GameStop developments, two thirds (66%) of Gen Z investors started to engage with investment accounts on social media, while over half (56%) decided to actively follow investment guidance shared on platforms such as TikTok, Instagram and Twitter.
Young investors reflect on lessons learned
However, while the saga may have prompted a rise in social media fueled investment decisions in the heat of the moment, as Gen Z investors now look back on the period, many are reflecting on the lessons learned.
Following the saga, one in four Gen Z investors (23%) have learnt they should be more cautious as a result of the GameStop developments, while one in five (20%) have realised that a short term “trading approach” is less effective than investing for longer time frames.
The developments have also led to greater appreciation for financial and investment professionals, with 16% wanting third party advice to help them invest and the same number (16%) now wanting a professional to manage their investments for them through a fund or trust.
One upside from the saga is that it has engaged a new generation of investors. A third (33%) of Gen Zs were encouraged to start reading and seeking more information about investing as a direct result of the events they were watching unfold, thereby helping to create much broader awareness and engagement in investing amongst this generation.
Ross Duncton continued his commentary, saying that the Gamestop phenomena, “has heralded a new generation of enthusiastic and engaged investors, which is a positive outcome, particularly when cash savings rates are so low. Many are now reflecting on the investment decisions possibly made in the heat of the moment, recognising that there are potentially more effective ways to grow their money over the long-term, with lower risk. Highly diversified trusts, such as F&C Investment Trust consisting of over 450 stocks, are professionally managed and designed to deliver more stable and long-term growth and income.”
