- The stock market’s youngest participants traded more often and with heightened risk appetites as the coronavirus slammed the economy, according to survey data from E-Trade.
- More than half of investors younger than 34 said their risk tolerance increased throughout the pandemic. Only 28% of the general population said the same, according to E-Trade.
- Forty-six percent of Gen Z and millennial investors said they traded derivatives more frequently over the period, compared to just 22% of the general population doing so. Risky assets including options have seen volumes spike as young traders capitalize on strong volatility and slashed fees.
- “Access to the market has never been easier,” Chris Larkin, managing director of trading and investment product at E-Trade, said, adding that research and strategy remain crucial for new investors.
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The US’s youngest investors took on more risk and traded with more volatile products as the coronavirus pandemic roiled markets over the summer, according to a new E-Trade survey.
More than half of Gen Z and millennial investors said their risk tolerance has grown since the outbreak began, according to the brokerage. Only 28% of all respondents said the same. More than half of investors below the age of 34 are also trading stocks more frequently throughout the pandemic and resulting economic slump, E-Trade said.
Roughly 46% of young investors said they traded derivatives more frequently. Only 22% of the general population said the same. Options trading, in particular, has seen a sharp increase across brokerages as retail investors capitalize on historic volatility and slashed trading fees.
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“Access to the market has never been easier, so investors just embarking on trading should walk before they run,” Chris Larkin, managing director of trading and investment product at E-Trade, said in a statement, adding that research, watch lists, and trading strategy are crucial for inexperienced investors.
E-Trade’s quarterly survey was conducted from July 1 to July 9 and included a sample of 873 self-directed active investors managing at least $10,000.
Young investors’ risky trading is also taking up a larger share of total stock market activity. Retail investors’ trades typically make up roughly 20% of market activity and, in the busiest days, comprise a quarter of transactions, Joe Mecane, the head of execution services at Citadel Securities, said in a July Bloomberg TV interview. That share is up from roughly 10% just last year.
Read more: Inside Eagle Investors, the 20,000-member online community run by 2 Indiana University students that’s helping spearhead the Gen Z day-trading revolution
Less than one-tenth of the young investors surveyed said their portfolios have fully recovered from the virus’ initial hit. Yet the coalition is holding out hope for a near-term rebound. Half of the respondents expect their portfolios to break even within the next six months. The general population is considerably less optimistic, with only one-third of respondents holding the same outlook.
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