Young Traders Are Taking ‘Big Financial Risk’ on Investment Apps
People wearing protective masks use smart phone while on an escalator at a BTS station in Bangkok, Thailand. (Photographer: Andre Malerba/Bloomberg)

Young Traders Are Taking ‘Big Financial Risk’ on Investment Apps

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Britain’s market watchdog warned that popular investment apps are exposing young consumers to big financial risks by drawing them into unsuitable cryptocurrency and other speculative investments.

The Financial Conduct Authority published research on Tuesday that found 59% of investors in high-risk products would face financial hardship if they took a significant loss on their positions. More than four in ten investors, the FCA found, did not acknowledge that losing money was one of the risks of their actions.

“We are worried that some investors are being tempted -- often through online adverts or high-pressure sales tactics -- into buying higher-risk products that are very unlikely to be suitable for them,” Sheldon Mills, the FCA’s executive director of consumer and competition, said in a statement.

The FCA surveyed 550 people who were considering or already making trading decisions, with a focus on people new to self-directed investing, who are more likely to be younger, female and non-White.

The regulator’s warning comes after the surge in retail trading over the last year, fueled by low-cost trading apps and posts on social media including Reddit message boards. The wild swings in GameStop Corp. shares, triggered by retail investors, recently faced scrutiny from U.S. lawmakers.

While there has been less of a frenzy in European markets, authorities in the region have cautioned investors about the risks of losing money. British investment platform Hargreaves Lansdown Plc said this month that it has seen high volumes of international share dealing, driven by interest in American stocks.

©2021 Bloomberg L.P.

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