Young shareholders: How young people invest

More and more young people are investing their money in the stock market. But how sustainable is this trend? And how is the current turbulence affecting the market?

Investing money in the stock market has never been easier: Investors can buy and sell stocks with one click via trading apps. Everywhere and everytime. This is particularly attractive for young people. With the apps, they always have their portfolio with them and can trade directly on the stock exchange.

During the pandemic, stocks and funds experienced a boom among young people, also fueled by trading apps. The number of shareholders under the age of 30 jumped by 577,000 people in one year from 2019 to 2020. This is the result of a study by Deutsches Aktieninstitut. Last year, the number of young investors again reached a high: according to statistics from the Deutsches Aktieninstitut, around 1.5 million people under the age of 30 now have shares or funds.

Will this trend continue?

However, Alexandra Niessen-Ruenzi, Vice Dean for Research and Director of the Center for Doctoral Studies in Business at the University of Mannheim, doubts that this trend will last long and is really sustainable: “The cautious hope that may have arisen in the context of the pandemic that there are now more young people who are interested in the capital market and invest their money there, I don’t necessarily share them.”

One can already observe that young people are turning away from trading apps again: “There are first signs that trading apps are getting into trouble. Because the same enthusiasm that prevailed at the beginning of the pandemic has now changed cooled down significantly,” says the financial market researcher in an interview with tagesschau.de. Above all, the trading apps ensured that young people started buying shares to pass the time during the pandemic: “Unfortunately, that was more in the spirit of gambling and not in the sense of long-term wealth accumulation.”

Fear of the telecom effect

Now, with the war in Ukraine, the economic situation has changed fundamentally: “We are currently seeing a high level of uncertainty on the stock exchanges and significant fluctuations in prices. That has many of these young investors who only started investing in the capital market two years ago , some of which have already cost considerable sums.” That’s why the expert fears that the current negative developments could deter young people: “What is now feared from a financial point of view is a kind of Telekom effect. According to the motto: A burned child shies away from the fire.”

Interest in financial topics

Gerrit Fey, head of the capital markets department at Deutsches Aktieninstitut, does not share Alexandra Niessen-Ruenzi’s fears: “We are optimistic that young people will participate in the stock market on a permanent basis.” On the one hand, many younger people have started investing in fund savings plans. “This is an instrument in which you continuously invest smaller amounts in a broadly diversified portfolio month after month, and such a contract is not easily terminated,” says the expert.

In addition, many young people had dealt with the topic very intensively during the pandemic: “Young people have learned a lot and are simply interested in the topic of investing. That’s why we believe that a basis has been created among young people that can be consolidated “Said the expert from Deutsches Aktieninstitut.

More financial market education required

Nevertheless, the two experts still see a lot of catching up to do: “We urgently need more financial market education in Germany. Also because areas such as private old-age provision are becoming increasingly important, but are often not reflected in the financial planning of many young people,” says Niessen-Ruenzi. Fey agrees. Because in order to establish a stock culture in Germany, knowledge about the processes on the stock market must first be conveyed to the population.

This also means that small investors should not allow themselves to be influenced by the current turbulence on the stock market. Because the investments should be long-term, for example to provide for old age. The best tips in a turbulent time like the current one are: keep calm and don’t let yourself be unsettled.