The recent GameStop stock saga raised many questions about modern trading and put a spotlight on the young investors who drove the Reddit rebellion. To find out more about who these young stock rockers are and what drives their investment decisions, MagnifyMoney surveyed more than 1,500 Gen Zers and millennials in late January.
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MagnifyMoney found that almost 6 in 10 Gen Z and millennial investors (age 40 and younger) are members of investment communities or forums, such as Reddit, and nearly half have turned to social media in the past month for investing research.
Key Findings:
- Nearly 6 in 10 investors 40 or younger are members of investment communities or forums, such as Reddit or a group of like-minded investor friends.
- YouTube is the top source for investing information among young investors, with 41% turning to the site in the past month. Other social media platforms that investors visit for related info include TikTok (24%), Instagram (21%), Twitter (17%), Facebook groups (16%) and Reddit (13%). In all, 46% of Gen Zers and millennials have used social media for investing information in the past month.
- 22% of Gen Z investors say they were younger than 18 when they started investing, versus 8% of millennial investors. In fact, 40% of Gen Z investors say they were encouraged by their parents to begin investing, which backs the earlier start.
- Only 36% of young investors plan to use that money for retirement. Instead, 35% will primarily use those returns to make additional investments, while 19% will use the money to pay for a major purchase like a home or a car.
- Nearly two-thirds (64%) of investors 40 and younger have withdrawn money from their investment accounts to spend. Of that group, the top three reasons were paying off debt (35%), buying a car (30%) and making a down payment on a home (25%).
- 22% of young investors trade stocks at least once a week. Even those who don’t make trades as frequently still do so on occasion, as 72% of investors 40 and younger say they trade at least once a year.
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Online is where it’s at when it comes to young people looking for investment information. The survey found that 33% of Gen Z (ages 18 to 24) and millennial (ages 25 to 40) investors belong to one online investment community or forum where people discuss investing, and another 23% belong to more than one. That’s nearly 60% of investors 40 and younger.
So, is this a good thing? That depends, said Tendayi Kapfidze, LendingTree chief economist.
“It’s great that these communities are introducing a lot of people to investing, which is one of the best ways to build wealth over a lifetime,” he said. “A concern is that some are leading to relatively short-term trading concentrated in a few stocks with hopes of getting rich quick.”
This may seem good in a bull market, he said, but it’s risky and can lead to significant losses if the market turns. Most people should have a long-term perspective with a balanced and diversified portfolio, he added.
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