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Two-thirds (66%) of young investors spend less than 24 hours deciding on an investment, and on in seven (14%) finalise their decision in under an hour, according to research for the City regulator.
Only one in nine (11%) take more than a week to decide if an investment is right for them, according to the survey of UK investors aged 18 to 40 for the Financial Conduct Authority (FCA).
“Fear of missing out” or fomo plays a major role in decisions, researchers found.
It’s important to look beyond the hype
Lucy Castledine, FCA
Over half (51%) of investors had put in more money into something than they originally intended due to fomo and this behaviour often results in riskier financial decisions being made, the regulator said.
Despite 63% of people surveyed believing that hype meant something was a good investment opportunity, 40% said they had regretted investing in hyped investment products.
Researchers found that £550 is the average amount spent on hyped investment products.
The FCA is encouraging people 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, an investment analyst at AJ Bell, said: “Getting caught up in the hype can be a dangerous thing.”
He continued: “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.
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
Dan Coatsworth, AJ Bell
“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.”
Some 2,000 investors aged 18 to 40 were surveyed by Censuswide in August.
The FCA, which has more information to help investors on the InvestSmart website, recommends five questions for people to ask themselves before investing:
1. Am I comfortable with the level of risk?
2. Do I understand the investment being offered to me?
3. Are my investments regulated?
4. Am I protected if the investment provider or my adviser goes out of business?
5. Should I get financial advice?
