Taking Stock of 2020…So Far
If you can believe, we are at the halfway point of 2020 (which, paradoxically, has come both quickly and slowly), and one thing we’ve been hearing is that frustrated investors in quarantine are behind a retail trading boom .
We wanted to know if this was true, and if so, why? So we asked you—over 2,000 of you.1 Here’s what you said.
More than 1 in 5 of our respondents began trading securities for the first time on a digital platform during the pandemic. Unsurprisingly, there were higher proportions of new digital investors in the younger generations—presumably, older respondents have had more time to establish accounts. Of those who already had online securities-trading experience, 35% indicated they were doing more pandemic-time trading, 38% said their trading levels were unchanged, and 27% decreased. For those whose trading activity increased, we drilled down into the possible reasons why:
Top responses as to why securities-trading activity has increased:
• Stocks seem like a bargain now (48% of respondents selected)
• I have extra money (41%)
• I am more aware of the importance of investing (39%)
• To replace activities that COVID restrictions have eliminated (34%)
• I wanted to invest in companies that I believe in (34%)
Everybody loves a sale, and investors are treating the stock market in 2020 like Black Friday at the mall—nearly half of our respondents are buying the dip because they feel stocks have fallen to attractive prices. Interestingly, the older cohorts were more likely to think that stocks are a bargain now—a whopping 75% of Baby Boomer respondents picked that option, compared to 50% of Gen X respondents, 54% of Millennials, and 39% of Gen Z.
“I have extra money” is a little bit of an unexpected finding during a time of record unemployment by many measures, but remember that the federal government has recently distributed coronavirus stimulus checks to over 159 million Americans. Indeed, 83% of our respondents received a stimulus check of some amount, and of those recipients, 50% said that they have put at least a portion of that check into the stock market.
We were surprised to see that more people weren’t trading more to make up for lost opportunities due to COVID-19. However, we did see an effect when we asked about respondents’ affinity for certain gaming activities; the people who engage in those kinds of activities indicated at a higher rate than average that they were trading more during the pandemic:
• Sports betting (53%)
• Fantasy sports (54%)
• Online casino gambling (50%)
Trust No One
We were also interested in learning a little bit more about whom investors trust, and are influenced by, when they are making investment and stock-purchasing decisions:
• Professional financial advisors (41% of respondents selected)
• Family (40%)
• News articles (35%)
• Financial institutions (34%)
• Friends (30%)
• Social media personalities (16%)
• Coworkers (13%)
• None of the above (9%)
No huge surprises, except for maybe the strong showing for “family.” We all love our families here but we’re not totally sure we’d trust them for investment decisions. We did, however, see some very interesting trends when we broke these results down by generation. As you move up in cohort demographic generation, respondents increasingly trust (Gen Z/Millennial/Gen X/Boomer):
• Professional financial advisors (30%/36%/41%/51%)
• None of the above (4%/7%/8%/14%)
Well, it was technically “none of the above” and not “nobody,” but it sort of makes sense—you gain some of your own life experience, which includes gradually coming to accept that even expert stock pickers have been unable to outperform a cat , a blindfolded monkey , or a bunch of reporters throwing darts at a stock table .
Conversely, as you also move in up cohort demographic generation, their trust decreases in (Gen Z/Millennial/Gen X/Boomer):
• Social media personalities (29%/19%/19%/3%)
• Friends (51%/37%/31%/11%)
• Family (60%/48%/41%/23%)
Gen Z has grown up with social media and we can see their comfort with it here. Our Gen Z respondents trust social media the most of all the age groups, with older generations trusting social media less. We see the same generational pattern in the trust in friends and family—there’s maybe a sad tale in here about losing all your money on a friend’s or uncle’s hot investment opportunity that turned out to be a pyramid scheme.
We thank everyone who participated in this study and hope all our readers enjoyed our dive into the results. All jokes aside, starting to invest is an indispensable component of achieving financial independence, and we hope that you’ll join us (or remain with us!) in making that a reality for you.
1Source: Based on a SoFi/Centiment Research survey of 2,054 general population respondents from June 24, 2020 to June 26, 2020
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC .