A total of 4.3 million people aged 18 to 24 owned an investment in May 2022, with nearly half of them having started investing in the two years prior, according to the FCA’s Financial Lives Survey.
The number of males investing their money has surged over the past few years. The watchdog’s report showed that nearly half (46%) of adult men now invest compared with 38% in 2020.
The findings also revealed a greater appetite for riskier investments. More new young investors (16%) have a moderate to high risk tolerance when it comes to investing, with only 5% of older investors falling into the same category. Cryptocurrency has also become increasingly popular, with 5.8% of the population investing in cryptocurrency in 2022, up from 2% in 2020. According to the survey, 46% of new investors hold cryptoassets, with many driven by the excitement or novelty factor.
Laura Suter, head of personal finance at AJ Bell, said: “Britain has undergone an investing boom, with two million more people investing in 2022 compared to 2020. Young men and cryptocurrency have put the rockets behind this surge in investing, but there’s been an increase across the board as pandemic savings coupled with high inflation have led more people to start investing.”
However, Suter warned that the desire to invest in riskier assets could be problematic.
“A big chunk of these new investors are risk-hungry, emotional men who are investing outside of tax wrappers and using social media for their research – meaning there is a potential for a shock coming down the line for some of this new wave of investors.
“While many may enjoy direct investing, rather than investing via funds, it’s unlikely to be the ideal starting point for many inexperienced investors. On top of this, taking higher risk with assets is fine if you’re not investing all your money and you can afford to ride out the highs and lows of volatile, riskier markets, but many signs point to people investing outside of their risk tolerances.”
In addition to cryptocurrency, there has also been an increase in other high-risk investments, such as contracts for difference, peer-to-peer lending, mini-bonds and unlisted companies. Yet, three in five people who have 25% or more of their investable assets in high-risk investments admit that a significant investment loss would have a fundamental, negative impact on their lifestyle – highlighting a clear mismatch between their investment choices and their risk tolerance.
However, the report also saw demand for traditional investing increase, with 1.2 million more people opening a stocks and shares ISA during the two years to May 2022. People also continue to hold substantial amounts in cash, with 79% of those with £10,000 – £20,000 in savings holding most or all of it in cash.
