It's no secret that 2022 is presenting unique challenges for investors, as both stocks and bonds have tanked in unison for the first time in decades.
Yet the combination of the latest fintech, data, and news tools — along with time-honored investing rules and psychology — are delivering more opportunities to younger investors than ever before.
In a recent episode of Yahoo Finance Uncut, Callie Cox, US Investment Analyst at eToro USA, and Jay Woods, Chief Market Strategist at DriveWealth, broke down some of the methods investors are using to navigate this historically difficult investing environment — as well as some eye-catching statistics on the newest generations of investors.
Cox notes that Millennial and Gen Z investors grew up during the Great Financial Crisis (GFC) and started out investing one step behind. She emphasizes this is not a complaint, just a factual statement. "[W]e're buying into many markets that are already expensive. So we're naturally accustomed to looking for a little bit more growth. We're in a better spot to invest in growth because we have that risk appetite," she says.
Cox brings it back to investing fundamentals and customer education. "[T]hat makes it even more important to have that plan," she says.
"I want [the customers to] be the best informed they can be, but at the same time I want them to be armed with enough knowledge on their own end to understand exactly what moves they need to make in these markets," Cox adds.
Cox's firm, eToro, conducts a quarterly survey of its customer base — and the latest stats reveal a different picture of retail investors than their frequent portrayal as speculative day traders. From 1,000 U.S.-based investors, eToro found that 80% of their investors buy or sell assets on a monthly basis or less often.
Further, retail investors have largely held their ground during the year's selloff. When it comes to stocks, 65% of the survey respondents held their investments, while 29% held and bought more — leaving only 6% who sold their investments.
Younger investors were a bit less likely to only "hold" their investments (42%). But they were much more amenable to "buying the dip" — with 43% holding and adding to their positions. Only 15% sold.
Learning from "the retail heard"
Woods admits he learns a lot from budding retail traders — including his own children — even when their interests fixate on hot meme stocks and crypto "coins of the day."
These generations have access to technology and tools that simply didn't exist back in the day. "I like the fact that the younger investors are more cognizant of what's going on and have that access — have the ability to just learn by doing," Woods says.
But Woods emphasizes that his praise comes with a caveat — risk management is still number one, and it's important to diversify.
"Don't put all your eggs in one basket because [you think] this is the next stock that's going to the moon. You know there's a lot of FOMO in this market — the fear of missing out on the next big thing," Woods says.
Woods admits that he's succumbed to FOMO regret as well, recalling the time he bought Google (GOOG, GOOGL) on its IPO debut — only to sell it after rallying 50%. (Currently, the stock — now, Alphabet — is up 3,300% from inception.)
While he still thinks about it every day, Woods says: "But that was my goal. I didn't know it would actually go to the moon. So you just have that strategy — if you reach your goal, cash out a little bit. It's okay. No one ever went poor by taking profits."
In the end, it's about having a game plan for each and every investment or trade. "[A]s long as you have that risk management and don't blow yourself up, then you'll be fine. Investing is not easy. But if you're in for the long term — [if] you're in it for the right reasons [and] you're diversified — you're gonna do okay," says Woods.
Jared Blikre is a reporter focused on the markets on Yahoo Finance Live. Follow him @SPYJared.