Table of Contents
Modern investing presents an interesting dichotomy: While it’s easier than ever to access the markets, navigating them has gotten increasingly complex. Thanks to a wide variety of platforms and mobile apps, investors have access to buying and selling assets with a few taps — often at little or no cost. However, technology has also ushered in new risks and challenges, from too much information to misinformation to media-driven market volatility.
Below, we take a closer look at the modern investing climate, emerging trends for young adults, some pressing challenges, and some ways investors can identify strategies that align with their goals.
Key Points
• Modern investing has been simplified by technology but complicated by providing access to excessive information and advice.
• Generally, young adults tend to invest early, use AI, and favor socially-conscious investments like ESG.
• Market volatility, misinformation and scams, and a lack of personalized advice pose significant challenges for investors.
• Diversification and setting clear financial goals may help manage investment risks.
• Continuous financial education and, in some cases, professional advice can help individuals navigate the modern investment landscape.
What Is Modern Investing?
Modern investing refers to the use of current tools, technologies, and data-driven strategies to help manage and achieve financial goals. Unlike past generations, today’s investors have access to mobile devices, online investing, and AI-powered tools, allowing them to research strategies, execute trades, and track portfolios in real time.
But along with this newfound ease comes added complexity. Investors now face a torrent of information coming from both traditional media and newer, less-regulated sources like social media. Many younger investors find themselves scrolling TikTok or YouTube for investing tips — encountering influencers who may or may not be credible.
Investors also have more choices than ever before, both in terms of what they can invest in and how they can invest. This also means a greater need for education, discipline, and critical thinking to navigate the complexities of modern investing.
These conditions can make investing feel overwhelming — even discouraging some from getting started in investing at all.
Key Characteristics of Modern Investing
Let’s take a deeper look at what defines modern investing today.
Technology and Digital Platforms
Access to the markets is increasingly more straightforward. These days, almost anyone with a computer/laptop or smartphone and an internet connection can register with an online broker and start trading.
Investors have a wide range of online platforms to choose from — from traditional brokerages to fintech startups — most of which offer accessible mobile apps and research tools. These digital tools allow investors to explore and trade most securities such as stocks, bonds, mutual funds, and derivatives.
But with so many platforms, dashboards, and features available, the real challenge lies in choosing the right one — and learning how to use it effectively. For many, that means experimenting with various tools before settling on a system that fits their goals and appetite for risk.
Rise of Social Media and Influencers
Another defining feature of modern investing is the sheer volume of information available — much of it coming from nontraditional sources. While earlier generations relied on legacy financial media outlets — like The Wall Street Journal, Fortune, CNBC, Bloomberg, or The Financial Times, to name a few — today’s investors are just as likely to get their information from YouTube, Instagram, TikTok, Reddit, or X (formerly Twitter).
The democratization of financial advice can be empowering, but also potentially dangerous. Not all influencers are experts, and some may promote certain investments for personal gain or sponsorship reasons. This can cause investors to make poor decisions, including risky “FOMO trading” based on hype rather than fundamental research.
Shifts in Young Adults’ Investing Strategies
Young adults have changed their investment behaviors in recent years, largely due to the issues outlined above: They have more access to the markets, and there’s more information that may encourage them to invest.
According to the World Economic Forum’s Global Retail Investor Outlook 2024, 30% of Gen Z investors began investing while attending college or in early adulthood. That’s double the rate of Millennials (15%), and far ahead of Gen X (9%) and Baby Boomers (6%).
Gen Z and Millennials are also more comfortable using AI-based platforms, such as chatbots, to seek financial advice, with 41% saying they would trust an AI assistant to manage their portfolios. Additionally, younger investors are more likely to prioritize values-based strategies like ESG (environmental, social, and governance) investing or impact investing.
What Are Challenges Facing Investors Today?
Despite the advances and opportunities of modern investing, several challenges can derail even the most seasoned investor. Here are some potential pitfalls to keep in mind:
• Information overload: We live in the information age, but more isn’t always better. The sheer volume of financial news, stock tips, social posts, and analysis can paralyze decision-making or lead to poor choices based on partial understanding.
• Market volatility: Geopolitical tensions, economic disruptions, pandemics, and overflow of information can cause market swings that are sharp and unpredictable. Investors today generally need to be prepared for the possibility of higher volatility across different types of assets.
• Misinformation and scams: Investment information found in social media may be inaccurate, incomplete, or misleading. In some cases, scammers use various online platforms to spread false information and promote fraudulent investment schemes. Even sophisticated investors may fall prey to scams disguised as legitimate opportunities.
• Emotional investing: With real-time updates and constant connectivity, modern investors may be more susceptible to emotional decision-making, such as panic selling during dips and chasing “hot” stocks. These pitfalls can be intensified by the rapid flow of information, interactions, and transactions on digital platforms.
• Lack of personalized advice: Robo-advisors can be efficient, but they may lack the nuance of personalized financial planning. For those with unique needs or goals, this could result in less-than optimal investment strategies.
Strategies for Adapting to Today’s Changing Landscape
The following investment strategies provide options that may help a wide range of investors explore potential advantages of modern investing technology, while side-stepping some of the potential pitfalls.
• Set clear financial goals: Whether it’s retirement, buying a home, or achieving financial independence, knowing your goals can help filter out some of the noise. Ideally, you want your risk tolerance and time horizon to shape your investment choices, rather than what’s trending online.
• Diversify intelligently: Diversification remains a timeless strategy. Rather than put all your eggs in one basket, consider spreading investments across asset classes, industries, and regions. While a portfolio may primarily consist of traditional assets like stocks, bonds, and cash equivalents, it may also include a smaller portion of higher-risk assets, such as alternatives like commodities or real estate, depending on an investor’s risk tolerance, time horizon, and financial goals. Some investors seeking a simple way to diversify their portfolios may find investing in exchange traded funds (ETFs) or mutual funds offer exposure to a broad range of assets.
• Consider dollar-cost averaging (DCA): Investing a fixed amount regularly may help reduce the impact of market volatility. Over time, DCA can help build wealth steadily without trying to time the market — a difficult endeavor even for professionals.
• Stay educated and skeptical: It’s important to make a habit of continuous learning. You can do this by subscribing to trusted financial newsletters, reading books by reputable investors, and following credible financial journalists. When evaluating tips or trends online, it’s important to always verify the credentials of the source.
• Seek professional guidance: While modern investors can — and do — go it alone, professional financial advice can be invaluable to help you work towards your financial goals, especially for retirement planning, tax strategies, and estate planning. Consider hybrid investing models that combine robo-advising with human oversight for a balanced approach.
The Takeaway
Modern-day investing offers unprecedented access and convenience, but also presents new challenges. From navigating digital platforms to parsing influencer information, today’s investors need to be more informed and discerning than ever.
Ultimately, effective modern investing often comes down to education, discipline, and having a clear understanding of your goals and the reasons behind them. Starting with a basic strategy, staying consistent, and seeking professional guidance when needed can go a long way toward helping to build confidence — and a stronger financial future.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
What are some investment strategies young adults may want to consider in today’s market?
Young adults seeking long-term growth potential may consider investing early and consistently. One possible strategy to consider is index funds or exchange-traded funds (ETFs), which offer diversification and are generally low cost. It’s also important to take advantage of employer-sponsored retirement accounts like 401(k)s, especially with matching contributions. Remember, though, that no investment strategy can guarantee returns or eliminate the possibility of loss.
Is modern investing really more complicated than it used to be?
In some ways, yes, but it’s also more accessible. The sheer volume of investment options, platforms, and financial tools can feel overwhelming. However, technology has simplified investing through user-friendly apps, robo-advisors, and educational resources. Compared to past generations, investors today can start with smaller amounts, trade with ease, and access global markets. The challenge lies in navigating the information overload and avoiding decision fatigue. With proper guidance, though, investing today can actually be more convenient and flexible.
What policies or changes might encourage more Americans to invest? Why?
Policies that boost financial literacy and expand access to retirement plans would likely encourage more Americans to invest. For example, encouraging employer-provided retirement savings plans and expanding access to low-cost investment platforms can make investing easier. Making financial education a core part of public schooling could potentially empower young people to start investing earlier. These changes lower barriers and increase confidence, which could help more people build wealth through consistent, long-term investing.
What can be challenging in modern investing?
The most difficult part of investing will vary from individual to individual, but common challenges in modern investing may include having too much information to parse through, wondering who you can trust, and figuring out which technology or tools to use to execute an investment strategy.
It can also be hard to stay disciplined, especially during market downturns. Emotional decision-making, like panic-selling when markets drop or chasing trends that are being hyped on social media, can hurt long-term returns.
Investors that seek long-term investment goals may want to consider developing and sticking to a plan, ignoring short-term noise, and avoiding the urge to time the market.
What does it mean to be diversified?
Being diversified means spreading your investments across different asset types, sectors, and regions, so that your portfolio isn’t overly dependent on one area’s performance. The idea is to reduce risk: If one investment performs poorly, others may perform more favorably, helping to stabilize your overall returns.
Diversification can be achieved through mutual funds, exchange-traded funds (ETFs), or by owning a mix of assets, such as domestic and international assets. Depending on your goals and tolerance for risk, diversification may provide a way to help reduce risk and build a more stable investment portfolio.
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