Worrying research from the regulator found that two-thirds of young investors take fewer than 24 hours to make investment decisions, with two in five investors regretting the purchase of a hyped-up investment product.
The survey, which polled 2,000 UK investors aged 18-40, found that two-thirds (66%) make investment decisions in less than a day, with one in seven (14%) deciding to purchase in fewer than 60 minutes.
More than half (51%) of young investors put in more money than they originally intended due to fear of missing out – so-called ‘FOMO’.
Going viral
The research revealed strong parallels between impulse-driven investment decisions and purchases of everyday viral products.
When asked more generally about any viral items they had purchased within the past year, crypto was fourth on the list (27%), behind air fryers (42%), which topped the list, smart watches (32%) and energy drinks (32%).
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More than three-quarters (76%) admitted they would likely buy an everyday viral consumer product based on online hype, and nearly two-thirds (65%) acknowledged they had the same attitude to investment decisions.
The FCA found that social media platforms are influential in young people’s investment decisions. More than eight in 10 (85%) young investors admitted that platforms such as Instagram, TikTok, and YouTube were highly influential in their investment decisions, with 43% using these platforms as their primary research tool.
Investors advised to look beyond the hype
The FCA is calling on investors to think more carefully before investing in high-risk or hyped products.
Lucy Castledine, director of consumer investments at the FCA, said: “If you’re considering investing, the very first investment you should make is some of your own time. It’s important to look beyond the hype, especially on social media, and do your research to make sure what you’re investing in fits with your financial goals.”
Dan Coatsworth, investment analyst at AJ Bell, said: “Getting caught up in the hype can be a dangerous thing. The FCA’s research shows that cryptocurrencies were fourth on the list of viral items people had bought within the last year. Cryptos are high-risk, volatile investments and are not suitable for everyone.
“Equally, piling into stocks and shares because they’re going up in value and everyone’s talking about them is a risky strategy, particularly if investors allocate more money than they can afford to lose or they buy after the price has already risen a lot. There is a risk they are buying precisely at the wrong moment and quickly lose money.
“Feelings of regret can reduce appetite for future investing and that could see individuals lose out if they don’t put away money for later in life. Investing mustn’t be rushed, but equally it doesn’t have to take up hours of someone’s time.”
The three golden rules of investing
Only invest spare cash
Paying down expensive debt should be a financial priority – as should setting cash aside for emergencies. Once those are sorted, you can budget for saving and investing.
Be happy with the risks you are taking
Investing might not be right for you if a small loss might keep you awake at night. But if you’re happy with investments moving up and down in value, investing can be rewarding over the long term.
Do your research
Don’t buy an investment because it’s hyped up on social media. Instead, you should consider how it may fit into your wider investing strategy and long-term financial goals.
