A survey released by Charles Schwab in June this year showed that nearly 60% of Americans are investing, which is similar to the consumer finance survey released by the Federal Reserve every three years. The latter shows that in 2022, 58% of households hold stocks directly or indirectly through retirement accounts, an increase of more than 5% from 2019.
In addition, Charles Schwab’s survey also shows that Americans are getting involved in investment at an increasingly younger age. Specifically, Generation Z (those born after 1995 and 2000) started investing at an average age of 19. In contrast, millennials (those born after 1980 and 1990) started investing at an average age of 25, while baby boomers born between 1946 and 1964 started investing for the first time at an average age of 35.
71% of Gen Z are confident in their investment strategies
Ads-ADVERTISEMENT
Ads-ADVERTISEMENT
“There has never been a better time to be an investor,” said Jonathan Craig, head of investor services at Charles Schwab. “It’s a very positive sign that more Americans are paying attention to their personal finances and taking steps to build long-term wealth, especially the younger generations, who have been saving and investing since childhood.”
Lv Caibowen, a Chinese student who completed undergraduate and graduate studies in the United States, told the First Financial reporter that he started to get involved in U.S. stocks when he was a sophomore in college because he chose the U.S. stock investment subdivision of the business English writing course. He was about 20 years old at that time. “Among the classmates I have contacted, there are more Americans. Generally, they invest their own money in U.S. stocks and don’t keep it in banks.” Lv Caibowen said.
According to a survey by Charles Schwab, 71% of Gen Z are confident in their investment strategies. 43% of Gen Z said that the reason for their confidence is that they learned about investing at a young age. More than a quarter of Gen Z said that they received education on investing in school, which is much higher than the 19% of millennials.
Lv Caibowen said: “Many teachers mentioned in casual conversations that in order to cultivate children’s independence, they helped them set up US stock accounts, deposited pocket money into the accounts, about two to three hundred dollars a month, and summarized investment experiences for the children every year. I feel that this is different from the traditional concept of financial management.”
According to a survey by Charles Schwab, about half of those who are not confident in their investment strategies said that their parents or family members did not teach them investment knowledge when they were young, or they did not learn investment knowledge in school. This is the main reason for their lack of investment confidence.
Lv Caibowen said: “It was a positive experience to be exposed to U.S. stocks at the age of 20. It cultivated my ability and habit of reading research reports, and also helped my English writing and reading. At the same time, I felt a sense of accomplishment when my investment generated income.”
Despite this, young retail investors have also been questioned by professional investment institutions and investors for having a “gambling” mentality or insufficient investment diversification. A report released by CFA2023 shows that 19% of Generation Z investors aged 18-25 only invest in cryptocurrencies, about 41% invest in individual stocks, and only 35% buy mutual funds.
Lower investment threshold
Retail investors have shown such a high presence since 2020. According to Citadel Securities, retail investors accounted for 25% of stock market activities in 2020, far higher than 10% in 2019.
In addition to the issuance of U.S. federal aid checks during the epidemic and the “stay-at-home order” that gave people more free time to invest, zero-commission stock trading platforms such as online brokerage Robinhood and some of the stock trading services they provide have greatly reduced the transaction costs of retail investors, attracting a large number of retail investors into the market.
Eddie Yang, a hedge fund practitioner who studies and works in the United States, opened a Robinhood stock account in his senior year. He said that when opening an account, he only needed to bind his U.S. Social Security account number (SSN) and bank account, and no proof of funds was required.
Ads-ADVERTISEMENT
Ads-ADVERTISEMENT
In an interview with Yicai Global, Yang said: “I don’t know what it was like to buy stocks in the past, for example, 20 years ago. But at present, various exchanges, including Robinhood, have made mobile apps very easy to use, and the threshold for opening an account has become very low. This is definitely good for everyone to enter the market.”
According to statistics from the Federal Reserve, in 2022, the median value of stocks held by American households fell from US$29,000 (about RMB 210,000) to US$15,000 (about RMB 109,000).
“(Using Robinhood) is a bit like fool-proof investing… The entire UI is relatively simple, it’s easy to search, and there’s almost no transaction fee… Interactive brokers and other platforms are quite complicated. If you open an account, you have to fill out a lot of documents. If you don’t study it carefully, you won’t understand what they are asking.” Yang said, “Many people start by investing two or three hundred dollars to play around, and then invest more when they have some spare money. If you set a high threshold for users at the beginning, users will be unwilling to open an account, and there will be no follow-up.”
Despite the controversy over payment for order flow, Robinhood announced last month that it had added 120,000 new customers in May, meaning it had at least one Robinhood account with a balance and completed at least one trade within 45 days. Its total number of funded customers is 24.1 million, with $135 billion in assets under custody, up 65% year-over-year.
In addition, retail investors’ investment methods have become more diversified. Bitcoin exchange-traded funds (ETFs) and zero-day options are also emerging among retail investors. In January of this year, the U.S. Securities and Exchange Commission (SEC) approved the listing and trading of 11 spot Bitcoin exchange-traded funds (ETFs) for the first time. Samara Cohen, senior managing director and chief investment officer of ETF and index investment at BlackRock, said in June this year: “80% of Bitcoin ETF purchases may come from ‘self-directed investors’ who usually allocate funds themselves through online brokerage accounts.”
According to a report released in May by financial technology company Broadridge Financial Solutions, the proportion of investors without a college degree in the United States exceeded 50% for the first time, reaching 51% in 2023. However, in terms of median assets, investors with only a high school degree hold $28,000, far behind investors with a bachelor’s degree ($73,000) and investors with a graduate degree ($148,000).
