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COVID pandemic breeds new generation of young investors

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LaToya Harding
·Contributor
·3-min read
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A string of trading platforms, including Robinhood, stopped users from investing any further in a number of 'meme stocks' in January. Photo: Pavlo Gonchar/SOPA/LightRocket via Getty Images
A string of trading platforms, including Robinhood, stopped users from investing any further in a number of 'meme stocks' in January. Photo: Pavlo Gonchar/SOPA/LightRocket via Getty Images

The coronavirus pandemic has created a new generation of investors in their late 20s and early 30s who are looking to do more with their money, according to a study by online investment management service Nutmeg. It looked into how attitudes and behaviours towards money management and investment have shifted as a result of the health crisis.

In its survey of 2,000 adults across the UK last month, it found that those between the ages of 25 and 34 were most bullish about personal finances and investment, with a big appetite for ethical investing.

Last year, 42% of all new investors joining Nutmeg’s platform were from the 25-34 category, a 58% increase from 2019. From an ethical investment standpoint, the number of new investors in general choosing socially responsible investment portfolios in 2020 doubled year-on-year.

Six in 10 people aged 25-34 have put more money in investments over the last year, compared with 38% of the population, with another notable interest from this group in stock picking.

As the rise in the DIY investor emerges, 21% of young investors admitted to being more likely to make and manage investments for themselves since the start of the pandemic.

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The research discovered that 22% were also much more likely to invest in specific companies they see or hear about.

The recent surge in stocks such as GameStop (GME) and AMC Entertainment (AMC) linked to the WallStreetBets page of chat forum Reddit has already highlighted the new power and weight of retail investors in the market.

These so-called “meme-stocks” saw a dramatic surge at the end of January amid a trading war between amateur investors and Wall Street pros who were shorting the stocks. This left Wall Street institutions such as hedge fund Melvin Capital, sitting on billions of dollars in losses.

A string of trading platforms, including Robinhood, eventually stopped users from investing any further in a number of companies for a short time after a spike in volatility. The buying ban sparked a furious backlash on social media platforms.

Nutmeg’s data went on to show that 43% of people aged 25-34 said they felt financially better off now than a year ago, compared to 29% of people overall.

Some 45% of millennials added they currently felt more confident about their finances than before the pandemic.

For adults across the UK, the top financial priority in the wake of the pandemic was feeling financially stable (52%), while a third (33%) of Brits cited ‘creating savings for life’s unforeseen events and emergencies’ as their key money focus in light of COVID.

Read more: Pandemic drives amateur investor trading boom

James McManus, chief investment officer at Nutmeg, said: “The COVID pandemic has caused financial difficulties for many people across the UK, but it’s pleasantly surprising to see the extent to which many young adults look set to emerge from the pandemic in a stronger financial position, and how much financial attitudes have been changed by the pandemic.

“Given millennials represent the largest age group in the UK, after baby boomers, these shifts in behaviour and attitudes towards investing are particularly significant and represent a huge opportunity for wealth creation – at both an individual and national level.”

Watch: How to save money on a low income