Social media and crypto has inspired a wave of new investors dubbed ‘Gen I’ to join the market, fresh data has revealed.
With Brits confined to their homes during lockdown many retail investors took to trading from the comfort of their own sofa – almost a quarter of UK investors are new to the market having joined in the last year.
The new generation of investors are younger than experienced counterparts, rely heavily on the internet for investment advice and are pouring money into crypto currencies, data from Charles Schwab.
“Against a backdrop of rising inflation and stagnant earnings, a new generation is turning towards investing as a way to grow their wealth,” said Richard Flynn, the managing director of Charles Schwab UK.
“Gen I brings a diversity of approaches to investing. It is somewhat concerning, however, that many new investors are being influenced by informal and unregulated sources of information,” he added.
The survey of 1,000 Brits found that less than a third of investors sought advice from a financial advisor. Instead, more than half of investors cited the influence of online blogs and forums, trading apps and Google.
The rise in financial influencers on social media may also have something to do with the fact that 57 per cent of new investors hold crypto assets. In September Charles Randall, the chair of the Financial Conduct Authority, raised the alarm about investors taking advice from social media guru Kim Kardashian, who is now being sued in a US court for her promotion of dubious crypto project Ethereum Max.
Jake Paul and Soulja Boy are among celebrities also being facing legal action for promoting a crypto currency, Safemoon, in an alleged pump and dump scheme.
“Investing always involves risk; risk which only increases if you take tips from sources on social media sites, such as TikTok,” Flynn said.
While it is easier than ever before for investors to access crypto markets through apps and online platforms, Flynn warned that the “unregulated and speculated nature” of digital assets means investors risk being exposed to “market volatility” if they allocate their entire portfolio to crypto.