Together or Not at All: What Drives Gen Z to Social Investing?

2002 and 2021 saw a massive influx of new retail and stay-at-home traders, prompted by a combination of lockdowns and lack of entertainment outdoors, causing many to begin looking for entertainment inside their computers. The keywords “Forex” and “Crypto Trading” on Google saw a huge boost in searches as the trends of consumers rapidly moved online.

Bitcoin traders had a remarkable year with the price of Bitcoin climbing over 90% in 2021 and Ethereum soaring over 265%. That all paled into insignificance compared to Solana’s gains of 9683%. This created a FOMO (fear of missing out) situation for those who had never traded before.

Meme trading also had its moment on the back of this, as an army of new traders got together on the WallStreetBets board on Reddit, to talk up shorted stocks. Their most successful attempts, with AMC and GameStop, led to mind-blowing success, with members quickly boasting about their new Lamborghinis that they had bought as a result. This taste of success led more and more newbies into the trading arena, however, it quickly became clear that as a trader you need more than beginner’s luck to enjoy success.

Investing for GenZ and Millenials

A perfect storm created by the pandemic and stimulus checks delivered to people by the US and other governments led to more money available for trading for people who had never traded before, most notably GenZ and millennial traders.

For these subsets of people, who grew up in a culture of social networks, online togetherness is at the heart of nearly everything they do. And apparently, this is how they get their investment advice too, with many turning to influencers on TikTok and Instagram for advice.

According to a report by Qualtrics on behalf of Credit Karma, the majority of Gen Z seek financial information through Instagram (57%) and TikTok (52%). This worries the Financial Industry Regulatory Authority who believe that the viral trading craze of meme stocks and cryptos has prompted unrealistic expectations for newbie investors.

Institutions have picked up on this ripe pool of new investors and have even started accessing it by collaborating with influencers to engage with GenZ. Some influencers though are using their massive follower base to try to move asset prices, by all placing the same trade at the same time. If it worked for the meme stocks, then why not for the main stocks?

Copy the trades of real traders

But investors be warned, following influencers without track records in investing is not the best idea. Step up, copy trading. Copy trading is not new, in fact, in the online trading markets, it’s been alive and kicking for over a decade with names like the forerunner eToro.

Copy-trading platforms allow users to follow and copy the trades or more experienced traders, and unlike the influencers, these traders have real stats showing their success rates and more. Another highly popular example of a copy trading platform is NAGA. NAGA is a publicly-traded company on the Frankfurt Stock Exchange. For this reason alone, NAGA must abide by strict rules and be completely transparent in its dealing. It has been offering trading solutions since 2017 to over 1 million traders.

Its suite of tools includes the massively popular copy trading service available for web and mobile. Its app allows newbie traders to see the success rates of trade leaders and to see how many traders are copying their trades, plus their success and return rates. From here, traders can simply auto-copy their trades and pause or stop when they want. In this way, new traders and investors can gain exposure to the markets with zero prior knowledge and even learn to trade by watching how the experts do it.

Final Word

There’s no doubt that to be a successful trader overall, a person needs to have an understanding of the markets and what moves assets. Without this, you can have beginner’s luck but not much more than that. For that reason, GenZ is advised to either learn to trade themselves without blindly following influencers or indeed to copy trades of real traders with a transparent track record.

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Image source: DepositPhotos.

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