BCSC study finds that 18–24-year-old investors are not following convention which may not work out how they want
Every generation has its own ways of doing things but diverting from long-established principles comes with risk as well as opportunity.
Canada’s current cohort of young adult investors are keen to do things their way and they may choose not to listen to professional wealth advisors.
A new study from the British Columbia Securities Commission reveals that today’s 18-24-year-olds are more likely to own stocks of individual companies rather than spread the risk through mutual funds or ETFs.
This trend has been growing over the past four years and 25-34-year-olds are also more likely to go down this path, while it’s hardly apparent among over 55s.
Younger Canadians are confident in their ability to spot the companies that will generate the best profits and under 25s are more likely to say their aim is a large return and big profit.
"It's natural that younger investors, given the long timeline in front of them, would be more inclined to take on more risk," said Pamela McDonald, the BCSC's Director, Communications & Education. "But today's younger investors are increasingly willing to take a chance on a particular company."
Gamification
Investors under 25 are more likely than older cohorts to believe it’s generally possible to ‘time the market’.
They also trade more often – at least once a week – to win back losses, and with larger amounts to ‘maintain excitement’. They are also trying to find new ways to get more money to trade.
These behaviours tie in with the trend for gamification of investing.
The BCSC report includes an analysis by Innovative Research Group to sort investors into different types.
One in five young adult investors could be described as "do-it-yourself" investors who are taking a more speculative and risky approach to investing; that type accounted for only one in 10 investors overall.
Another 18% of young adult investors hold only crypto and nothing else; this group amounts to just 6% among all investors.
Shunning advisors
The report also shows that young investors are less likely than older groups to trust traditional investment professionals with just 23% working with an advisor compared to 40% across all age groups.
Under 25s are turning to platforms such as TikTok, YouTube, and Instagram for investment information.
They are also more likely to be self-directed investors and to put money into riskier investments such as options or mortgage investments.
"This research shows young investors are following a different path than generations before," McDonald said. "By understanding the goals and behaviour of younger investors, we can have a clearer idea of the tools and support they need to work toward a positive financial future."
