These platforms have democratized access to investment markets, however they can also lead to problems for inexperienced young investors.
A new generation of investors has come to town. They’re young, they seek advice on YouTube, and they’re armed with apps that have made the stock markets more accessible than ever before.
The American application Robinhood has succeeded in the West with its mission to open markets to “normal people”, but teenagers and twentysomethings, from Nigeria to India, are hooked on equivalent programs in their respective countries.
“I don’t really care about my studies, to be honest. It’s all market, market and market, ”Ishan Srivastava, a student from New Delhi who started investing in the stock market in December, told AFP.
This 20-year-old uses various Indian apps like Zerodha and Upstox and often gets financial advice from YouTube. His ambition is to compose a varied investment portfolio and retire at 45.
In India, this investment revolution has been facilitated by the rise of so-called “demat” accounts, easy-to-open electronic accounts for managing financial securities, stocks and debt.
It is not a singular case. 8,000 kilometers away, a similar furore for these investment apps is spreading across Nigeria.
Banks, “less attractive”
Its economic capital, Lagos, is known for its hunger and reverence for success, but the weakness of its currency, the naira, is adding added pressure on youth to make money as the price of life has skyrocketed.
In their case, Nigerians turn to local apps like Trove or Risevest that allow them to invest in US markets, considered safe assets while the naira nightmare continues.
“I had the option of putting the money in the bank, but as the months go by, it becomes less and less interesting,” explains 23-year-old Dahunsi Oyedele.
“Sometimes I put my money in Risevest and make a profit in a week. Imagine getting a 1-2% return on 100,000 naira ($ 240) every week. It’s small, but it means a lot, ”he argues.
For several months, after losing his job as a tech journalist due to the pandemic, Oyedele paid his rent by trading cryptocurrencies.
It is a fairly widespread phenomenon during the COVID-19 crisis, when the combination of massive unemployment, lockdowns and, in fortunate cases, some savings, pushed many into the world of finance.
Only in the United States, more than 10 million new investors entered the markets in the first half of 2021, according to JMP Securities.
The new investors are in a great majority young. The average age of Robinhood users is 31 years old. Both the Indian Upstox and the Nigerian Bamboo claim that more than 80% of their users are under 35.
These apps have blurred the barriers to entry for young people, in part by offering fractional shares.
An Amazon title, for example, is currently worth more than $ 3,000, unattainable for most Gen Z youth or older millennials.
But a fraction of that action can be affordable, especially in a commission-free app.
Flirting with danger?
Although celebrated for democratizing access to markets, These applications can also lead to problems for young inexperienced investorscritics warn.
The US Securities and Exchange Commission is investigating whether these programs irresponsibly encourage excessive investment, using email alerts and presenting finance as gambling.
And the British financial authority FCA warned in March that this new cohort of young investors, made up especially of women and minorities in this country, could be especially harmed in this adventure.
Almost two-thirds of the new investors interviewed by the entity said that in case of significant losses there would be “a fundamental impact” in your current and future lifestyle, FCA said.
“This new group of investors rely more on recent networks (such as YouTube or social networks) for advice and news,” said the regulator.
And some young investors have already experienced bad luck firsthand. Mumbai-based product designer Ali Attarwala is taking a break after a bad cryptocurrency experience earlier this year.
“These applications facilitate the purchase of speculative assets such as cryptocurrencies, but there is still a lot of volatility in these assets,” explains this 30-year-old man.
Srivastava has also been through ups and downs, but sees these losses as part of learning. “When I started, I lost almost 50% of the capital,” he acknowledges.
“I do not treat them as losses, but as the price of learning,” he says. (I)
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
