15% of Investors Got Their Start Last Year: Learn More About ‘Gen I’
Among the hobbies that became popular during the pandemic were baking sourdough bread, binging Netflix — and investing. A recent survey conducted by Schwab found that 15% of U.S. investors put money into the stock market for the first time in 2020. Dubbed “Generation Investor” or “Gen I,” these new investors span generations and income brackets, but they do have a few things in common.
Here’s a closer look at the latest generation of investors.
Several Factors Likely Contributed To This Surge of New Investors
Andrew D’Anna, senior vice president for Schwab’s retail client experience, believes that there were a number of catalysts that pushed Gen I to get into the market.
“There are several factors likely driving the surge in first-time investors, along with increased engagement among existing investors, including the evolution toward lower trading costs and recent moves to $0 trade commissions, new products and services aimed at greater ease and accessibility, and the investing opportunities presented by the historic bull market and volatility we’ve experienced,” he said. “The dynamics of so many people working from home has also likely resulted in more people spending time investing and focused on the stock market.”
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Most Members of Gen I Are Millennials
The Schwab survey dug deep into the demographics of this new group of investors and found that:
- Their mean income is $76,000
- 59% have a partner and 55% have children
- 59% are male
- 51% are millennials, 22% are Gen X, 16% are Gen Z and 11% are boomers
- 54% own their homes
- 71% have some college education or more
D’Anna said that millennials are in a life phase where they can and should be actively investing, so it makes sense that the majority of Gen I is from this age group.
“Millennials have had some years to advance in their careers and accumulate some wealth, and many of them also have some important life milestones on the horizon, all of which are common catalysts to begin investing and build wealth for the long-term,” he said. “According to our survey, members of Gen I are planning to move to a new state or home (21%), start a new career or job (24%) or are preparing to have a baby (14%).”
Gen I Is More Bullish Than Pre-2020 Investors
Gen I is more optimistic about the market and their financial futures than those who have been invested for longer. The survey found that 72% of Gen I is optimistic about the stock market compared to 62% of pre-2020 investors, and 57% of Gen I believes the stock market will increase in value versus 44% of pre-2020 investors.
In addition, members of Gen I are more active investors: 43% plan to invest more in the stock market compared to 20% of pre-2020 investors, and 30% plan to spend more time managing their portfolios compared to 19% of pre-2020 investors.
“The stock market is in quite the bull run — the S&P 500 is up almost 10% in 2021, and about 40% in the last 12 months. So while investors who got their start in the market in the last year have experienced some volatility, the market has overall been on the rise,” D’Anna said. “But Gen I understands that investing and building wealth are long-term endeavors, and they also understand risk — more than half say they think about how much risk they can handle both emotionally and financially.”
Gen I Has Been Hit Harder Financially By the COVID-19 Pandemic
The survey found that 39% of Gen I has had their finances negatively impacted as a result of the COVID-19 pandemic. Meanwhile, only 28% of pre-2020 investors said the same.
“The pandemic and the significant impact it had on the economy and stock market taught us a valuable, and in many cases difficult, lesson about the importance of financial health and preparedness, including the importance of having a plan and emergency savings. While Gen I was more financially impacted by the COVID-19 pandemic than those invested before 2020, the group turned its challenges into an opportunity, and they saw investing as a way to work toward their financial goals, starting with building an emergency fund (54%),” D’Anna said.
Gen I Are Educated Investors
When selecting investments, 94% of Gen I said it’s important for them to have access to information and tools to do their own research, and 90% said it’s important to have access to educational information to help improve their investing and trading skills. In addition, 82% of Gen I said that it was important to have access to an investment professional to provide periodic or ongoing help and guidance.
“New investors are hungry for investing education and advice,” D’Anna said. “We know they’re turning to social media platforms and online forums, but they also want education and tools from their investment firm. Our industry has a responsibility to help investors develop the knowledge and skills to be financially confident and become lifelong savers and investors.”
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Gen I Is Now Focused on Long-Term Investing
When Gen I got into the stock market in 2020, 44% were interested in short-term gains and 56% bought in to hold for long-term gains. But looking to the year ahead, much of Gen I have shifted their priorities — now only 28% say they are invested for short-term gains, and 72% are in it for the long-term potential of their investments.
“When it comes to their investing strategy, Gen I says the biggest surprise during their first year of investing was learning that investing is more about long-term gains than short-term wins, and 72% of these new investors expect to buy and hold for the long-term in 2021,” D’Anna said. “This view will help them become successful long-term investors.”
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