FINRA Survey: Fewer New Investors; Crypto Interest Wanes

The pace of new investors entering the market has “declined significantly” over the past several years, according to a new analysis conducted by the Financial Industry Regulatory Authority.

In this year’s FINRA Foundation’s National Financial Capability Study, researchers found that 8% of investors in 2024 reported beginning to invest within the last two years, compared to 21% who said they’d started in the past two years in a 2021 survey.

The results are from the investor survey portion of the study, which included 2,861 U.S. respondents with non-retirement investment accounts. They follow previous survey reports from 2021, 2018 and 2015. According to FINRA Foundation President Gerri Walsh, the survey results underscore the challenges younger investors face.

“They still struggle with gaps in investing knowledge and risk assessment, which can leave them vulnerable to costly missteps,” Walsh said.

While the survey doesn’t track the same individuals over time, tracking investors with less than two years of experience in 2021 to those with three to five years of experience in 2024 showed a median age boost from 31 to 38, suggesting “some proportion” of younger adults who started investing during the pandemic have dropped out of the market.

While individual stocks remain the most common investment in non-retirement accounts, followed by mutual funds, the upward trend in the prevalence of ETF ownership stalled between 2021 and 2024, after a 10% increase from 2015 to 2021.

Additionally, the percentage of investors owning penny stocks, REITs, private placements or structured notes has declined slightly, returning to levels last seen in 2018. Meanwhile, younger investors are far more likely to own individual stocks than mutual funds, and are more likely than older investors to have an options account and conduct options trading.

While the percentage of investors willing to take “average risks in exchange for average returns” remained at 48% between 2021 and 2024, the percentage of investors willing to take substantial risks for significant returns dropped by 4%.

While investors under 35 were still the most willing to take substantial risks, the decline in risk-taking was highest among that group between surveys, dropping from 24% to 15% (the other age groups either dipped slightly or remained unchanged). Nevertheless, 62% of investors under 35 reported that they feel taking a considerable risk is “necessary,” compared to only 16% of investors 55 or older who share the same sentiment.

While cryptocurrency awareness has continued to climb from 85% in 2018 to 92% now, the percentage of investors considering crypto declined from 2021, from 33% to 26% (the percentage of investors in crypto remained unchanged at 27%).

The likelihood of considering crypto investments is correlated with age, with nearly half (49%) of investors under 35 considering crypto investments, compared to 8% of investors 55 or older.

However, the percentage of investors under 35 considering crypto investments plummeted by 13 percentage points since 2021, compared to smaller declines in older age groups, while the percentage of respondents with crypto investments dropped three percentage points in investors under 35 (while increasing by three percentage points among investors 35 or older).

Additionally, the likelihood of considering investing in crypto dropped sharply among investors with less than two years’ experience. Among crypto-aware investors, about two-thirds viewed it as an “extremely” or “very” risky investment.

“This perception has increased substantially relative to 2021, jumping back to 2018 levels,” the report read. “It is possible that the crash of the cryptocurrency market during 2022 is partly responsible for this reversal.”

Content Original Link:

Original Source At Yahoo Finance

" target="_blank">

Original Source At Yahoo Finance