Fifteen percent of all investors in the U.S. stock market say they made their first investments in 2020 — and they weren’t all young, or all focused on the next hot issue, according to survey results Charles Schwab released Thursday.
Schwab attributes the growth and engagement among individual investors over the past year to lower trading costs, new products and services aimed at greater ease and accessibility, and investing opportunities presented by market volatility.
“A big part of this growth is Generation Investor — the large number of people who are bound together not by their birth years but by when they got started in their investing journey — who are now on a path to ownership and reaching their financial goals,” Jonathan Craig, the firm’s head of investor services, said in a statement.
Logica Research conducted the online survey in the first half of February among 1,000 Americans aged 21 to 75 and, for comparison, an augment sample of 200 investors who began investing in 2020.
Who Is Generation Investor?
Gen I, as Schwab refers to them, is younger than those who began investing before 2020, with a median age of 35 versus a median age of 48, but these new investors span all age groups: 51% are millennials, 22% Gen X, 16% Gen Z and 11% baby boomers.
Gen I earns $76,000 per year, about $20,000 less than the older investor generations, and half lives paycheck to paycheck.
Gen I also had to overcome some hurdles in order to get invested: 62% said they were financially affected by the pandemic, compared with 52% of pre-2020 investors.
Despite the challenges, and with found time and unprecedented change, 54% started investing to build an emergency fund and 53% to gain an added source of income.
And rather than “setting and forgetting,” 2 in 5 said they keep better track of their savings and finances, compared with just a third of pre-2020 investors.
The survey found that Gen I is also hungry for access to information and tools to do their own research, educational materials to improve their investing skills and an investment professional to provide ongoing help and guidance.
Craig said it is incumbent on the industry give this group the tools and services it needs to be successful over the long term.
Focused on Saving and Long-Term Goals
Looking beyond the current crisis, 52% of Gen I members say they will save more once the pandemic subsides, 43% plan to invest more and 42% will work to reduce their debt.
As to their investing strategy, Gen I respondents say the most surprising thing they learned during their first year in the market was that investing is more about long-term gains than short-term wins.
This year, 72% say they will buy and hold for long-term gain, compared with 56% who said this in 2020, and only 28% will trade for short-term gain in 2021, versus 44% last year.
Although 38% of Gen I has a written financial plan in place, 41% admit that they have not thought about their portfolio’s tax efficiency, and 51% do not fully understand how fees work.
Many also say they have important life milestones on the horizon — moving to a new state or home, starting a new career or job and preparing to have a child.
“What we found in our survey is that this group is not all short-term risk-takers,” Andrew D’Anna, senior vice president for Schwab’s retail client experience, said in the statement.
“They want to make informed decisions backed by education and professional guidance, which will be important as they navigate different life events.”