2.5% of investors use social media as their sole research tool according to Freetrade
Freetrade, the investment platform, released research on Monday that challenges some of the misconceptions around first-time retail investors.
There has been an explosion in retail activity over the past year, as retail investors have been portrayed as “young, naive, impatient and highly susceptible to misleading discussions about “hot stocks” pushed via social media”, according to Freedtrade.
However, research suggests that the contrary is true. Freetrade reckons that many first-time retail investors set “realistic” long-term goals, while “developing constructive, life-long habits”.
Two-thirds of investors are under 35, half of whom live with a partner/spouse, while 68% live in a property they own.
81% of investors are approaching investment as a long-term habit, while 91% say they lack confidence when they first invest.
Younger people, 18-25 year-olds, are generally more cautious according to Freetrade, and are also more goal-oriented, with the desire to boost their income being the most common motivator.
The role of social media can be overstated too, as a mere 2.5% of investors saying they use it as their sole research tool.
Adam Dodds, CEO of Freetrade, said: “These findings suggest that the buzz around investing is not a fad. Millions of people are getting into investing for the right reasons and picking up an important, life-long habit which should be nurtured and celebrated.”
“While we have seen a number of stereotypes about new and inexperienced investors taking hold in the last twelve months, our research shows, by contrast, that their behaviour is much more conservative.”
“What we do need to worry about is the behaviour of platforms. We’ve seen genuine, positive momentum build in the DIY investing space this year. It would be a shame if retail investors ended up getting shouldered with heavy losses because they were encouraged to dabble with complex, leveraged derivatives. Firms that offer CFDs and spread betting are simply duping their customers into speculating to line their own pockets, and they threaten to undo the progress made by damaging the reputation of responsible investing.”
