(BFM Bourse) – Since the Covid-19 pandemic, a new population of investors is learning the stock market. And these neophytes tend to overestimate their degree of financial knowledge, according to an OECD study carried out for the AMF.
Since the health crisis, a new contingent of savers is interested in investing in the financial markets. These new stock market investors are also younger and get more information on social networks.
But they also tend to overestimate their level of financial knowledge, also reveals a study published by the OECD on behalf of the Financial Markets Authority (AMF). The survey covered a large sample of more than 8,000 people which made it possible to question more than 2,000 individual investors, including more than a thousand having purchased investment products for the first time in the last three years.
With this study, the AMF says it wants to “better understand savers who have started investing in the markets since 2020” with a view to directing its actions, particularly in terms of education for this public.
A predominantly young population
Half of these new individual investors – representing 12% of the French adult population – took the plunge at the start of the Covid-19 pandemic, i.e. at the start of 2020. The study refines a little no longer the robot portrait of these neophytes. This population is predominantly male (64%), and rather young (56% are under 35 years old).
The stock market watchdog had already noted a rejuvenation of the investor population. Nearly 40% of new investors who have arrived on the Paris stock markets since the start of the year are under 35, according to another AMF study published this summer.
“These new investors live mainly in urban areas and declare a level of qualification, income and assets higher than the French average,” adds the study.
Three-quarters of these new investors hold more than one investment product. Half have invested in crypto-assets, compared to 25% of traditional investors. Life insurance in euros is the second most held product (33%), followed by retirement savings (29%) and listed shares (24%).
Excessive confidence among neophytes
In their choice of investments, these new investors consult the documentation on the products, their relatives and the press and specialized information sites, including BFM Bourse (of course). But for the youngest respondents aged between 18 and 24 (41%), social networks are their primary source of information. They also cite influencers.
On this subject, the AMF regularly warns about investment advice provided online and particularly on social networks. The stock market policeman invites investors, particularly the less seasoned, to exercise the greatest vigilance and also to question the credibility of these recommendations.
“A small portion (7%), in particular more modest profiles, do not seek advice or information before investing,” specifies this study which adds that the type of sources consulted by these investors seems correlated to their level of financial knowledge .
However, it emerges from this study that these neophytes display excess confidence with regard to their level of knowledge in financial matters. 73% of 18-24 year olds judge their level of knowledge to be “high”, 75% of 25-34 year olds and 67% on average (compared to 58% of longer-term investors). But when asked about basic concepts such as the effects of inflation, diversification or the risk/return ratio, more than half of the youngest only answered two questions out of six correctly.
Likewise, “the majority of those investing in very risky products, such as derivatives, options or crypto-assets, were unable to correctly answer questions relating to the use of these products “, notes the study.
“Earn a lot more money quickly”
The investment horizon of these new investors is also shorter. Two thirds of them plan for less than 10 years (compared to 37% among longer-term investors). If “earning a lot of money quickly” with their investment is the priority for 73% of those questioned, but surprisingly the majority express “their preference for products with moderate risk and return (61%)”.
This population is certainly looking for quick gains, but it nonetheless remains virtuous in its investment approach. Sustainable investing was mentioned by 20% of new investors as one of the main reasons they started investing. This is the first motivation mentioned by 18-24 year olds (31%), as well as by those with the highest monthly income and financial assets.
“Overall, 83% of new investors said they consider sustainability issues before investing in a given financial product,” the study notes.
Here too, the AMF was already highlighting the appetite of young investors for so-called sustainable investments. Investors under the age of 35 represent half of the investors who have subscribed to sustainable funds since 2022, according to a study carried out in April 2023 by the OpinionWay institute for the Financial Markets Authority.
Sabrina Sadgui – ©2023 BFM Bourse