eToro CEO on younger investors: ‘Caution is definitely here’

eToro U.S. CEO Lule Demissie joins Yahoo Finance Live to discuss investing trends, especially among millennials and younger investors.

Video transcript

- OK, well with the markets experiencing a tremendous amount of volatility of late, investors on trading app, eToro aren't shying away. According to a Q2 retail investor survey from July, 92% of investors either held on to investments or bought the recent dips. But how has that continues to hold up over the past few weeks? For more on this, let's welcome in Lule Demmissie eToro US CEO. Good to have you on today.

Let's start with that question. Brian was talking about crypto specifically, but broadly speaking, what kind of inflows have you seen on your platform in recent weeks?

LULE DEMISSIE: Yeah, I mean broadly speaking for us, what we see is consumers who are cautious, but optimistic in the way that they behave. So most of our customers are customers that have told us through their behavior that they are more buy and hold, and they are holding through the dips here. There's definitely a split in between our customers when it comes to about-- half think that the markets are going to return soon, and half think that this is going to be choppy for some time.

So the cautiousness is still there. But what's really interesting, I think from what we've seen on our platform at eToro USA, versus let's say, when I was-- I've been in this industry for many years. And what we saw in '08 is that people are more cautious, but it doesn't look like they're panicking.

BRIAN CHEUNG: Really, it's Brian Cheung. It's great to have you on the program. So is there any sort of change though in the allocation. Because we have noticed over the last, let's call it two months or so, a pretty remarkable bounce back across a number of different asset classes. Do you find that people are going into, for example, meme stocks or crypto being more risk tolerant than they were, say, at the beginning of the summer?

LULE DEMISSIE: Yeah, you know, it's interesting. Our platform is in some ways in an anomaly because we attract tomorrow's investors today. So over 55% of our customer base is millennial-- older millennial-ish, right. And the majority of our customer base is actually Xers and millennials. So we actually see a different spectrum, if you will, of the investor base than most other places.

And so for that reason, because these people have a longer arc in their investment lifecycle, they can afford to remain sort of long-term and less panicked about the short term. So we do see still people who are more-- who are less averse to risk, again, not necessarily new purchases, but what they're holding. And in addition, we're seeing in some instances, especially among our Xer consumers a little bit more flight to quality to be able to endure this choppy market. But again, not a flight to quality that's wholesale, but at the margin.

- Yeah, I mean, how do you think that has shifted from where we were, let's say at the beginning of 2021. We've talked so much about the growth of the retail investor, but also the evolution in January of 2021, it was about the meme stocks. And we're seeing, hearing increasingly that they're getting into ETFs. They're getting to your point into more value plays. How is that broad portfolio shifted as you see it?

LULE DEMISSIE: So a few places. So one is you see, as I said, a little bit more at the margin flight to quality. Not a panicked one, but just a smart one right. Because you're seeing more flight to quality right now. We do see consumption in more, if you will, pick your consumption in terms of either the sectors they're picking or the asset classes they're picking.

But again, because we have longer term investors, there's a lot that are also seeing this as a buying opportunity. So we do see uptick in technology in other, places in which even though the market has given up some of those gains in the past few months. Individuals seeing that as a buying opportunity because again, their horizon is longer. We again, when you're looking at our real platform, you're saying, millennials and Xers majority millennial. It's a different mindset, if you will.

The one thing I will say again is like millennials of today, we're not the millennials of '08. Meaning again, there is that wisdom of the crowd that I feel you see it embedded in the behavior of the investor that I feel like was not there in '08. Caution is definitely here, though. We can't underestimate that people are cautious. I think the underlying thesis here though, is that, It's not panic.

BRIAN CHEUNG: Well, can I ask if that millennial dynamic plays into an interesting stat that I read here, which is that younger investors were actually least likely to hold, but more likely to buy more with prices are down. So net net, is that actually more willing to take on risk, because that's a bit surprising to me. I thought that it was the younger people who might be more "hodl," you know, with diamond hands here.

LULE DEMISSIE: Yeah,

BRIAN CHEUNG: What's going on there?

LULE DEMISSIE: Yeah, I mean, I think part of it is the story that feels sizzly and exciting is the meme stock. It makes sense, right most things that we read, it's interesting. But actually, that's not where most of the consumption behavior is. A lot of the consumption behavior is not as undiversified as we think it is. People can still partake in a particular individual security that's high volatility or again, very depressed right now in this market environment, but still buy a diversified ETF instrument.

Like they're not necessarily divorced from one another in the consumption, behavior, of many individual investors that are on our platform and in retail at large. And so I think part of it is like not to get lost with the flash headline, and to make sure we're looking at the behavior of the broader body politic of investors that have come into this market.

- Lule Demmissie, eTORO, us CEO. it's good to have you on tonight. I appreciate you, stopping by.