Beth Pinsker: ‘Risky behavior’ by young investors is driven by advice on YouTube and Reddit

by | Dec 17, 2022 | Stock Market

Young investors are learning as they go and might be picking up bad habits along the way, says a new study from the Finra Investor Education Foundation. “They are younger, so they can afford to take more risk, but there seems to be more going on here,” says Gary Mottola, director of research of the Finra foundation, which is associated with the financial-regulatory agency.

The report, “Investors in the United States: The Changing Landscape,” surveyed 2,824 respondents who were 18 or older between July and December 2021. What exactly are they doing that’s so risky? Trading options, buying on margin, speculating on meme stocks, dabbling in crypto and doing it in large part for short-term gain or for fun. And all the while, they’re using YouTube as a main source of investing education. It’s no wonder that on the survey’s 10-question investing-knowledge quiz, those 18 to 34 only got four questions correct on average. A sample question: True or false: The past performance of an investment is a good indicator of future results. Half got it wrong. About 10% said they didn’t know. (See below for the answer.) Here’s how some of the data show red flags: Options trading Overall, only one in five investors reported having traded options, which are contracts to buy and sell stocks, and not actual stocks themselves. That number was heavily skewed by the 18- to 34-year-old crowd, of which 36% had participated, compared to only 8% of those 55-plus. But the …

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