Cryptocurrency traders, According to a new study commissioned by the UK’s Financial Conduct Authority, this is a young and diverse group that is not always smart about their investment decisions.
The study, which was carried out by the international strategy consultancy BritainThinks between mid-August 2020 and the end of January 2021, was based on a sample of 517 “self-managed investors”, i.e. those who make investment decisions on their own behalf and are not looking for professional financial advice.
The results show that 38% of those surveyed have no functional reason for their investment decision. D.Instead, I prioritize emotional factors like the thrill of trading and feeling ownership of the companies they invest in, which maintains a perceived social status.
Challenge, competition and novelty overshadow more sober, long-term motivations for these investors. B. the more efficient and profitable use of their cash holdings. While the majority of respondents said they were very confident and competent in their investment area, many reportedly lacked awareness or belief about the risks they were facing.
More than 40% saw “losing some money” as no potential investment risk and a large majority of 78% agreed with “I trust my instincts to tell me when to buy and sell”. 78% also agreed that “there are certain types of investments, sectors or companies that I consider a” safe bet “.
What’s more This cohort of investors was more ethnically diverse, younger and more female than traditional investors. The study attributes this to better accessibility of new investment apps, as well as to social media and YouTube ads that many respondents rely on for investment news and tips.
Linked to this thirst for investment news and challenges, however, is the relative inability of these investors to financially cope with potential investment losses. 59% of respondents with less than three years of investment experience would find that their lifestyle has been profoundly affected by a significant loss. Commenting on the study’s findings, Sheldon Mills, Executive Director, Consumer and Competition Affairs for the FCA, said:
“We fear that some investors will be tempted to buy riskier products that are most likely not right for them, often through online advertising or high pressure sales tactics.”
“Investors should be aware of their general risk appetite, diversify their investments and only invest the money they can afford to lose in risky products,” he added.
In parallel with the release of the study, the FCA is launching a digital campaign to contain investment damage today with a series of specific questions designed to encourage traders to pause to think before passing the it.