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Young investors in the UK are increasingly likely to trade in speculative assets such as cryptocurrencies compared with traditional investments such as equities or bonds, according to the latest Investment Forces research from Charles Schwab UK.

The research reveals that more than half of millennial and Gen Z investors (51%) trade in cryptocurrencies, a large increase from when this research was last undertaken in May 2020, where 44% of young investors traded cryptocurrencies. The rise in popularity of these products means the 18-37 years demographic are now more likely to trade cryptocurrencies than equities (25%). In contrast, only 8% of investors aged over 55 trade cryptocurrencies.

Young investors think market makes it harder to get good returns

The growth in the popularity of cryptocurrencies has occurred during a turbulent year for most markets. Eight in ten millennial and Gen Z investors (80%) believe the recent economic difficulties are making it much harder to get good investment returns. There is some optimism for the future – 79% of young investors think the current difficulties in financial markets will be offset by a recovery in the longer-term – but in the interim, higher risk assets like cryptocurrencies and contracts for difference (CFDs) are much more in favour than traditional products.

The research shows 70% of young investors now view cryptocurrency as a good investment option. One in three young investors (33%) also said they had increased their purchases of cryptocurrency in the past three months compared with 13% who had sold or invested less.

In addition, spread betting has also become more attractive for younger investors. More the six in ten (61%) millennial and Gen-Z investors think CFDs are an attractive option, with almost one in four (23%) having purchased or increased their purchases of CFDs over the past three months. However, the research also shows the popularity of cryptocurrencies and CFDs declines significantly as investors get older. Only 5% of investors over the age of 55 bought more cryptocurrency in the past three months, and just 4% of these investors increased their purchases of CFDs during the same period.

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Investors may not be diversifying their portfolios enough

As more young people purchase speculative products, there is a fear that these investors are not diversifying their portfolios enough to mitigate risks in case cryptocurrency markets decline. More than seven in ten (71%) young investors admit they are unsure how to adapt their strategies to protect against losses in the current financial climate. A further 49% say they find it difficult making decisions about investment products.

“Digital platforms and the sheer volume of financial information available today has made it much easier for young investors to trade and cryptocurrencies seem to be the flavour of the month,” observed Richard Flynn, UK Managing Director at Charles Schwab. “It is important to remember that these are speculative assets that don’t fit within traditional asset allocation models, as they are neither a traditional commodity, such as gold, nor a traditional currency. While the prospective returns are tempting, investors should be aware that it is just as susceptible to supply and demand, but will not necessarily have the inherent value behind it.”

Like any trades, some people will make money on cryptocurrencies and contracts for difference. If young investors are looking to adapt their strategies to protect against losses, a diversified portfolio, balanced across asset classes and sectors is a more sensible, time-tested approach.

“We would encourage any new, inexperienced investors to learn as much as possible about different assets prior to making any investment, especially if they find it difficult to make investment decisions,” said Flynn.


Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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