New FINRA Foundation Research Examines Changing Investor Demographics, Preferences and Attitudes

• One in Five Investors Started Investing Recently

• Younger Investors More Comfortable with Risky Investments

• One Third of Investors Open to Cryptocurrencies

WASHINGTON—A substantial proportion of investors joined the market relatively recently, younger investors are more likely to engage in riskier investment behaviors and a third of investors are considering investing in cryptocurrencies. These are just some of the findings contained in new research released today by the FINRA Investor Education Foundation (FINRA Foundation).

The study, "Investors in the United States: The Changing Landscape," reveals a new generation of younger and less experienced investors that is vastly different from older generations in their investment behaviors and attitudes.

"The study provides a deeper look at the changing demographics of investors and the evolving attitudes toward investments. The findings show that younger investors — ages 18 to 34 — are more likely than older investors to invest for reasons that include social responsibility, entertainment or social activity. The data also show that younger investors are more comfortable with using mobile trading apps, relying on social media as a source of investment information and trading higher-risk investments — such as cryptocurrencies, options and so-called meme stocks — even though some of these investors appear to be less prepared for the risks," said FINRA Foundation President Gerri Walsh.

"The valuable insights from the study can help policy makers, regulators and educators rethink the tools and channels necessary to educate and protect both long-time investors and the rising generation of new investors," Walsh added.

The findings are drawn from the Investor Survey component of the FINRA Foundation’s 2021 National Financial Capability Study (NFCS). A total of 2,824 U.S. adults with investments outside of retirement accounts were surveyed between July and December 2021.

Key Findings:

• New investors. One in five investors have less than two years of experience. The percentage of investors who began investing in the two years prior to the study (21 percent) is nearly as large as the percentage who began in the preceding eight years (25 percent).


• Risky behaviors. Younger investors are more likely to engage in riskier investment behaviors. Thirty-six percent of younger investors report trading options, compared to 21 percent of those ages 35 to 54, and 8 percent of those 55 and older. Nearly a quarter (23 percent) of younger investors report making purchases on margin, compared to 12 percent of those ages 35 to 54, and 3 percent of those 55 and older.


• Crypto acceptance. The percentage of investors considering cryptocurrencies has increased to 33 percent, and 27 percent are already invested — up from 18 percent and 12 percent, respectively, in 2018. Among younger investors and those with less than two years’ experience, more than half are invested in cryptocurrencies.


• Meme stock popularity. Eighteen percent of investors report trading shares of GameStop, AMC or Blackberry (which were popular meme stocks in early 2021). Among younger investors, nearly two in five report buying or selling shares of these stocks, compared to about one in five of those ages 35 to 54, and only 4 percent of those 55 and older.


• Evolving platform preferences. Online trading through a website is the most common method for placing trades (62 percent), followed by mobile app (44 percent) and contacting a financial professional (44 percent). The use of mobile apps is up considerably from 30 percent in 2018. Younger investors and newer investors are much more likely to use a mobile app for placing trades than older respondents or more experienced investors.


• Motivation. The main motivation for nearly all investors is to make money over the long term (96 percent). However, large majorities also want to make money in the short term (72 percent) and learn about investing (65 percent). Younger investors are much more likely than older investors to invest for reasons other than long-term profits, such as social responsibility, entertainment and social activity.


• Investment information sources. When making investment decisions, investors most often rely on research and tools provided by brokerage firms, business and finance articles, financial professionals, and friends, family or colleagues. Among younger investors, a majority (60 percent) use social media as a source of investment information, compared to 35 percent of those ages 35 to 54, and only 8 percent of those 55 and older. Over half of investors under 35 use YouTube (56 percent), and 41 percent use Reddit. YouTube is also among the most popular social media channel for investment information for all ages overall (28 percent).


• Fee confusion. Many investors are unaware of or confused about various fees they may pay for investing. Over one in five investors (21 percent) do not think they pay any kind of fee for investing, and 17 percent say they do not know how much they pay. Among mutual fund owners, nearly two in five (38 percent) believe they do not pay mutual fund fees or expenses.


• Disclosure delivery preference. Email (38 percent) has overtaken physical mail (30 percent) as the most widely preferred method for receiving disclosures. Preference for email has increased since 2015, while preference for physical mail has decreased.


• Low investor knowledge. The average number of correct answers on a 10-question Investor Knowledge Quiz is 4.7. More than two in five respondents (44 percent) think that the past performance of an investment is a good indicator of future results. Less than a third (29 percent) understand that the main advantage of index funds over actively managed funds is generally lower fees and expenses.

About the FINRA Investor Education Foundation

The FINRA Investor Education Foundation supports innovative research and educational projects that give underserved Americans the knowledge, skills and tools to make sound financial decisions throughout life. For more information about FINRA Foundation initiatives, visit www.finrafoundation.org.

About FINRA

FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.