Are fledgling investors taking on too much risk? Broadly speaking, the answer seems to be 'yes'. Research commissioned by the Financial Conduct Authority recently found that newer, younger investors tended to take greater risks while showing little financial resilience.
A BritainThinks paper found those who had been investing for less than three years were more likely to focus on racy areas such as peer-to-peer lending, foreign exchange, cryptocurrencies and binary options than their more experienced peers. Over half – 59 per cent – of the newer cohort claimed that a significant investment loss would have a “fundamental impact” on their current or future lifestyle, compared with 38 per cent of those who had invested for more than three years.
As the boom in DIY investing continues, these findings appear to confirm some more cynical assumptions. Younger investors could well run into trouble if hot assets go awry – with big consequences for their wellbeing and future investing habits.