This article is not about some new medical condition that many do not understand. It is about a social disorder that afflicts many younger generations, although older generations are not immune.
The ‘you only live once’ (YOLO) mindset is embraced by many who underestimate the risks of financial insecurity. The last 16 months of social isolation, fear about the future and the fragility of our health may prove to be the antidote for the toxins injected into our lifestyles by YOLO fever.
Various studies are being published to gauge how investor behaviour has changed in the last several months due to people spending more time at home, governments flooding the economy with trillions of euros, and stock markets breaking all records thanks to irrational exuberance.
A study by the Halifax Building Society found that 16 per cent of young Britons aged between 18 and 24 began investing for the first time during the past 16 months. This may seem modest, but Generation Z would usually consider that saving is for oldies.
A more interesting finding is that of a Barclays Smart Investor survey that saw its account openings surge during the pandemic. This survey indicates that nearly half of investors planned to cut back on spending after lockdown to maintain their investing habits. This is good news for those who believe in the wisdom of investing for financial security. It is a less encouraging prospect for policymakers who rely on pent-up demand to boost economic growth in the coming months.
Many have suddenly realised that the ‘you only live once’ mindset that they embraced in the past has not served them well in the pandemic
The ease of investing through online platforms, the inexperience of many younger investors and the instinct to gamble are hidden icebergs that many investors fail to see. This failure may spell disaster for those who believe that they have instantly discovered the alchemy of creating wealth.
The UK’s Financial Conduct Authority (FCA) has warned that financially vulnerable younger investors are engaging in “unsuitable” high-risk investing offered by rapidly growing investment apps.
Sheldon Mills, a senior executive of the FCA, said: “We are worried that some investors are being tempted – often through online adverts or high-pressure sale tactics – into buying higher-risk products that are very unlikely to be suitable for them.”
Crypto investors are the most likely to damage their wealth through a combination of inexperience and an unrestrained gambling instinct.
Not all younger investors are adventurous. They rightly believe in taking advice, research the cost of investing and have a healthy expectation of what their investment decisions are likely to produce.
UK investment platform Free Trade found that half of the investors under the age of 25 invested in relatively risky equity, like Tesla, but the other half preferred the cost-efficient and diversified exchange-traded funds (ETFs).
In the current low-interest-rate and high volatility scenario prevailing in financial markets, investors will do well to research the portion of their hard-earned money that investment brokers will be slicing off throughout the term of their investment. Many investment advisers argue that passive investments that track the main indices should form the core of an investment portfolio for those with a low to moderate risk tolerance level.
DIY investment strategies carry considerable risk. It is encouraging to note that younger investors are not only becoming less prone to suffer from YOLO fever but are more likely to seek advice before making investment decisions.
A survey by CreditCards.co, a financial service adviser, found that 80 per cent of the Gen Z cohort sought investment advice, compared to 60 per cent of Baby Boomers and 64 per cent of Gen X investors.
The end of the pandemic may look reassuringly near. The hidden health and economic icebergs created by COVID that many failed to see or preferred to ignore are still there. We need to navigate our way around them with care. The resilience of our healthcare system, the importance we individually give to our medical and financial well-being, and the lifestyle that is most likely to see us living safely and happily need to be scrutinised.
Many have suddenly realised that the ‘you only live once’ mindset that they embraced in the past has not served them well in the pandemic. Financial insecurity comes next to poor physical and mental health as one of the most significant risks we need to manage.
It is never too late to start saving for a rainy day. The earlier one starts, the more confidence one gains to absorb the impact of an unforeseen economic crisis without having to depend on others to survive.