People new to the world of investing often seek advice before dipping their feet in the water.
But who are they asking for these recommendations? The answer tends to depend heavily on the asset class. In traditional stocks and bonds, they are talking to financial advisors. I often consult friends and the internet about cryptography.
This is one of the many differences between new cryptocurrency buyers and more traditional investors, highlighted in findings released Monday by financial industry regulators and NORC, a research institute at the University of Chicago. just one.of the group 12 page report found 29% of investors opening their first taxable investment account in 2022 named financial professionals as their primary source of investment information. However, among first-time crypto investors last year, only 9% cited a financial planner as their primary source of information.
Instead, new crypto investors are much more likely to put money into digital assets after talking to friends, colleagues or family, a source cited by 48% of the total. Also among the sources frequently referred to by new crypto investors were personal surveys, cited by 25% of the total, and social media, also cited by 25%.
Similarly, new crypto investors were much more likely to cite a friend’s suggestion as their primary motivation for investing. Just over 30% said they acted on the advice of a friend. Only 9% of newcomers to stocks, bonds and other standard investments cited the same sources.
Newcomers to traditional investing were much more likely to cite a desire to save for retirement. compared to just 6% of new cryptocurrency investors said the same thing. Equal proportions of both types of new entrants said they started investing because they could start small (24% of respondents) or because they didn’t want to miss the opportunity (10%).
Thomas Kopelman, a financial planner and founder of AllStreet Wealth in Indianapolis, said new clients are more likely to approach him not just for investment strategies, but for tax and real estate buying advice. said.
He said that the wealth management industry’s reliance on fees and other fees for individual trades in stocks and other securities has decreased, making people more comfortable approaching planners for investment advice. I believe.
“They now realize that financial planners are really there to help,” says Kopelman. “I don’t care about getting a specific asset. I help build your financial life.”
Nadine Burns, a certified financial planner and CEO of A New Path Financial in Ann Arbor, Michigan, said young and new investors typically get a “bad reputation.” Many of the clients she works with are not only willing to follow her advice on saving, but are willing to take out long-term life insurance or pay off credit card debt. people who have just graduated from
“Especially if you have kids, they’re probably doing these things at a higher rate than their parents,” Barnes said.
Barnes said her clients rarely ask about cryptocurrencies. If so, she said she will do her best to persuade them to consider less risky alternatives.
FINRA and NORC, self-regulatory bodies for the broker-dealer industry, conducted a survey of 465 people who opened a taxable investment account for the first time or invested in cryptocurrencies for the first time in 2022. The investigation he continued from September 9th to September. In 2022 he will be the 29th.
The survey also compared the latest results for new investors to a similar survey conducted almost two years ago. This highlights a poll conducted of her 480 adults between Oct. 26, 2020 and his Nov. 13, 2020.
The results suggest that the pace of new investors entering the market has not slowed since the peak seen during the COVID-19 pandemic. After the first outbreak in March 2020, Americans poured money into the stock market, in part due to stimulus checks arriving in their bank accounts.
JP Morgan Chase Estimated 10 million brokerage accounts launched in 2020, much of it through online services such as Robinhood Markets.Investors put in more $900 billion in equity funds In 2021, it will exceed the total of the past 19 years.
According to FINRA and NORC research, 3.6% of US adults opened an investment account for the first time in 2020. Two years later, this percentage rose slightly to 4.2% for him.
According to the report, “While 2022 no longer flooded the media with stories of new account openings, the influx of new investors did not slow down.”
Cryptocurrencies like Bitcoin have become even more runaway in recent years.Investors held about $1.15 trillion in crypto on Tuesday, according to online tracking service coinmarketcap.com. Of that, over $532 billion was Bitcoin.
Bitcoin has opened at around $16,000 a year as the digital asset industry remains reeling from fraud revelations on crypto exchange FTX. But now it has jumped to about $27,000 per coin.
Newcomers investing in cryptocurrencies for the first time were even more common. The survey results suggest that 4.9% entered the market by buying cryptocurrencies for the first time in his 2022.
Their reasons for investing were also different from other new entrants. Only 25% of his new crypto investors said they were saving for retirement, compared to 56% of traditional investors who cited that goal. Also, the number of people who said they were primarily interested in learning about investing (39% of cryptocurrency investors vs. 29% of traditional investors) and speculation (29% of cryptocurrency investors vs. 29% of traditional investors) There was also a difference in the number of people who said they were interested in
New crypto investors tended not to show a willingness to hold their assets for the long term. Nearly 28% said they would sell their holdings within a year, well ahead of his 2.5% of newcomers to traditional investing who said the same. More than 19% of his traditional investors say they plan to continue investing for 10 years or more. Only 8.4% of new crypto investors could say the same.
Cryptocurrency investors tended to be young and were less likely to have a college degree. Their average age was 37, while the average age of traditional investors was 43. Also, only 28.5% of crypto investors have his four-year college degree, well below his 46.3% of traditional investors who have a degree.