Younger investors regret ‘impulsive’ decisions

A new FCA consumer study has found that younger people - those aged 18-40 - are impulsive and heavily influenced by social media when it comes to investing. The study found that two-thirds of young investors say they take less than 24 hours to make an investment decision. One in four young investors say they make investment decisions “impulsively” to keep up with current trends, with £550 the average spend on 'hyped' investment products. Some 66% of 18 to 40-year-old investors spend less than 24 hours deciding on an investment, and 14% finalise their decision in under an hour, the study found. Two in five investors later regretted purchasing a hyped investment product. The survey, which polled 2,000 UK investors aged 18 to 40 in the summer and is published today, suggests many younger investors make decisions quickly with little research. One in seven young investors (14%) decide to purchase in under 60 minutes and only 11% take more than a week to decide if an investment is right for them, the study found. The FCA said 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 last year, crypto was fourth in the list (27%), just behind air fryers (42%), which topped the list, followed by smart watches (32%) and energy drinks (32%). Over three quarters (76%) of those polled 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. Reasons for investing in hyped products were similar to those for consumer purchases: missing out on a good opportunity (32%), driven by the desire to feel good in the moment (26%), and wanting to keep up with trends (23%). “Fear of Missing Out” (FOMO) plays a major role. Over half (51%) of young investors (18-40) said they had put in more money than they originally intended due to FOMO and this behaviour often results in riskier financial decisions being made, the FCA said. Social media platforms are very influential, with 85% of young investors admitting that platforms such as Instagram, TikTok (X), and YouTube were highly influential in their investment decisions, with 43% using these platforms as their primary research tool. The FCA is calling on investors to think more carefully before investing in high risk or hyped products, by thinking about their long-term financial goals. Lucy Castledine, director of consumer investments at the FCA, said the findings suggested that younger investors should pause and spend more time considering investments before making a move. Data is taken from 2,000 UK respondents aged 18-40 years old who have purchased a viral trend or products they have seen online, as well as those who currently hold, have held in the past, or are considering investing in a range of investment products including high-risk. The research was conducted by Censuswide in August 2024. More information is available on the FCA’s InvestSmart website. Financial Planning Today Analysis: The FCA's new InvestSmart survey shines a light on the not unexpected impulsive investment decisions younger people make. The survey covers a wide age range from 18-40 and there are likely to be considerable behavioural differences between those at the younger age range and those nearly 40. One key challenge for regulators is the 'impulsiveness' of investment decisions and the fact that 40% of investors later regretted these 'on the hoof' decisions. Of course, experience takes time but many younger investors will have learned by getting their fingers burned. Building in stronger cooling off periods to investment decisions could be one way to tackle this. Adding a compulsory 14 day cooling off period to most investment products would be a step forward. A key issue here is the risks younger investors take because of their impulsiveness. In the modern world, it is far too easy to tap on a button and spend or lose a large sum to a flashy but bogus investment. Adding suitable warnings and a pause for breathing space could well be a useful focus for the FCA in future when it comes to protecting younger investors.

Younger investors regret ‘impulsive’ decisions - FCA

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