Thanks to neo-brokers, access to the stock market has never been easier. Young people in particular have been attracted by quick money since the Corona crash. But investing in hype stocks is like going to the casino, says financial blogger Thomas Kehl in an interview.
ntv.de: The Corona crash in March 2020 was followed by a gold rush mood, which also attracted young people to the stock market. Losses are a completely new experience for them. How do your followers react to this?
Thomas Kehl: It was pretty amazing that so many people went to the stock market at the beginning of 2020. In fact, crashes tend to discourage people from going public. However, the initial panic quickly turned to optimism. Many young people have also taken the opportunity to invest in stocks at favorable prices. It even went so far that brokers were sometimes completely overwhelmed because too many people wanted to open a securities account. Since then, the courses have only known one Direction: up. When they went down again last month, we could already see that the new young investors are taking a critical look at the issue. Because it is precisely the shares that have gained so much in the past year, namely predominantly the technology stocks, that have lost disproportionately much by up to 40 percent. But I don’t have the feeling that this development will cause a Telekom-like shock.
Does that mean the uncertainty isn’t that great?
There is a bit of uncertainty, as far as I can tell. But not to the extent that it deters people or that masses of young people leave the capital market again.
There was a particularly large increase among new investors among the 14-29 year olds. What do young investors want in the stock market?
The same as the old ones: generate returns and build up your old-age provision for as long as possible. In the beginning, entry into the stock market through brokers such as Robinhood or Trade Republic may have been dominated by the urge to play, which encourages their customers to participate in the capital market. At the same time, of course, there is also a long-term benefit when young people build up wealth.
Stock market apps make accessing the stock market easier than ever. Consumer advocates warn against a playful character that tempts to gamble. Right?
Similar to social media, neo-brokers have addiction-promoting mechanisms that fuel the need to keep checking the app. The criticism is absolutely justified. In the past, you could only check your portfolio on a PC. Today, investors can use their smartphones to check their portfolio at the bus stop and buy new shares with just a few clicks. The brokers live on it. The more you trade, the more Robinhood or Trade Republic earns. One should not forget that.
What dangers does the stock market hold, especially for investors under 30?
Overall no more dangers than for people who get on later. Investing in stocks is always risky. Unfortunately, many do not understand this. When we say: On average, stocks offer a return of between six and eight percent after inflation, this information only applies to a long-term investment. Stock markets are extremely volatile.
Are young people more willing to take risks? Many of them invest in trending themes like crypto or meme stocks.
Young people can initially afford to invest more risky because of their longer investment horizon. After all, they can sit out possible crash phases longer. The high level of speculation surrounding Gamestop may make it appear that young people are more risk-averse. That cannot be proven. But what can be said: The percentage of cryptocurrency in the portfolio of young people is much, much higher than that of investors who have been on the stock market for 20 years.
Are cryptocurrencies suitable for young investors?
Investing in cryptocurrency has little to do with age and more to do with understanding. Investors should generally not invest in anything that you do not understand yourself. The system behind cryptocurrencies is complex, and the majority are either scams or doomed to fail. Either because they have too small a community or because they are technically weak. You have to decide: what makes sense, what has a real benefit and what doesn’t. If you decide to invest in crypto, you should invest a lot of time and research. However, anyone who wants to build up wealth does not necessarily have to invest in crypto. This is a completely optional asset class.
How high is the risk when young people with no experience invest in hype stocks like those of the US video game provider Gamestop?
Investing in hype stocks is like going to the casino. From the moment I set foot in the casino I have to realize: the probability of winning is very small. If I am aware of this, hype stocks can be taken into account in the investment decision. However, only play money should be used for this – i.e. money that can be easily dispensed with. A wise investment decision would be to stay away from it. However, I also know that sometimes the urge to play can prevail.
What else do you recommend to young investors so that they don’t burn their fingers?
Speculation should never jeopardize long-term wealth accumulation. A second depot can prevent you from lying to yourself and allows you to always keep an eye on the actual performance of speculations.
Financial influencers have enjoyed enormous popularity since the Corona crisis. How can new stockbrokers recognize black sheep?
What sounds too good to be true often is. If someone promises to earn significantly more with my money than I do, I would be very skeptical and ask: How does he do it? Otherwise, you can only protect yourself from fraud with education. Bitcoin, as an example of a cryptocurrency, is extremely complex. Custody of Bitcoins alone is complicated, so it is important to understand exactly when I am putting my Bitcoin at risk and when I am really in control. If I can’t do that, the risk is too high that my money will simply be gone. There are too many technical pitfalls.
What responsibilities do financial influencers now have?
We want to give our community the tools to make their own financial decisions. People should be able to independently analyze which financial product makes sense and which ones should I rather keep my hands off. Other influencers give specific recommendations, but we distance ourselves from them.
Juliane Kipper spoke to Thomas Kehl