A sizeable majority of young investors seeking high-risk opportunities are motivated by competition and hype, a new survey shows. They often turn to cryptocurrency and forex products, according to a survey by the UK Financial Regulator.

FCA launches “Investsmart” campaign for risky investors

The UK’s Financial Conduct Authority (FCA) has carried out new research into the attitudes of young investors towards high-risk products. The watchdog interviewed 1,000 respondents between the ages of 18 and 40 as it launches a five-year campaign to reach inexperienced investors that could cost the UK taxpayer £ 11 million ($ 15 million).

Through the survey, the regulator found that many of these investors are driven by competition from friends and family when investing in cryptocurrency and forex. Three-quarters of respondents, 76%, said they felt a sense of competitiveness, while two-thirds, or 68%, compared the experience with gambling.

UK Watchdog believes that competition and hype are driving young crypto investors

At the same time, only a fifth of all respondents, 21%, are considering holding their last investment for more than a year and only 8% expect to keep the assets for at least five years. This despite a prevailing preference (60% of respondents) for long-term investments that offer more stable, albeit lower, returns.

The hype on the news and social media has been another driving force for new investors looking to purchase risky products. Well over half of the study participants, 58%, said they felt encouraged to invest money in investments that they heard about constantly in news reports, on social media channels and from other people.

The new study by the FCA also shows that most of the young investors who have bought cryptocurrencies, a staggering 69%, believe that they are regulated by the FCA and another 57% believe that the same applies to the forex products they have bought. Financial regulators concluded that these people failed to understand the lack of adequate protection for them and their money.

The Treasury also notes that the survey was conducted after around one million UK investors increased their holdings or made a risky investment between April and October 2020, during the height of the Covid-19 pandemic. When announcing the research results, the FCA further emphasized:

The regulator fears that new investors will increasingly access riskier assets that may not be suitable for them or that reflect their risk tolerance.

With its Investsmart campaign launched on Wednesday, the regulatory authority now wants to help investors make the right decisions. The initiative is part of the agency’s consumer investment strategy. It was announced in September to increase investor confidence and limit the number of people who become victims of scammers or are tempted to invest in products that are too risky.

Investsmart targets inexperienced investors across social media and online, according to the FCA. The campaign urges investors to ignore the hype and redirects them to the regulator’s website for appropriate assistance. “With our InvestSmart campaign, we are taking an innovative approach to reaching those tempted by high-risk products so that they can better understand the risks and seek advice,” said Sarah Pritchard, Executive Director of Markets at FCA.

Do you agree with the results of the FCA survey? Let us know in the comment section below.

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