The Robinhood crowd came to the fore this year, with their enthusiasm for meme stocks making them a force for professional traders to reckon with. Pandemic lockdowns sparked a wave of interest in day trading, and with it rose the dangers of misunderstanding the boundary between investing and gambling. Still, retail buyers' appetite for risk shows no sign of abating.
That's my interpretation of a global survey of retail investors just published by Schroders Plc, the UK's biggest standalone fund manager with assets of 717 billion pounds ($946 billion). Schroders surveyed almost 24,000 people in 33 locations earlier this year, each planning to invest a minimum of $13,000 in the coming 12 months.
One of the most striking data points concerns the stellar returns many respondents expect to make. More than half of those aged below 51 anticipate making at least 10% per annum in the next five years. While double-digit gains feel like they've been the norm for the S&P 500 in recent periods, total returns since 1999 lagged at less than 6% in four of those years and ended up in the red in five others, even as recently as 2018 and with 2008 negative to the tune of more than 37%.
While the older cohort typically has a more conservative portfolio that would deliver more modest returns, those with longer to go until retirement may be in for a disappointment.
Taking on more risk is the strategy those younger investors are pursuing to juice their returns. Some 44% in the lowest age bracket say they'll buy high-risk securities, compared with just 28% aged between 51-70. While younger investors have longer time horizons that allow them to take a more speculative stance, that gap strikes me as rather wide.
Cryptocurrencies feature prominently in the report, too, which is to be expected given the current zeitgeist. Almost a third of investors who classified themselves as beginners said they had invested in digital currencies such as Bitcoin or Ethereum in the previous year; this rises to more than half for those who rated themselves as experts.
More surprising is the crypto interest among older investors, with more than a third of those above 51 saying they'd bought virtual currencies in the previous year and a fifth of those aged above 71 dabbling. Moreover, the inflation narrative that's been building all year has prompted even the younger crowd to seek the haven of precious metals, with more than half saying they'd bought gold, silver or related stocks and funds, along with crypto.
There's no doubt that the democratization of finance is a force for good. The immutable mathematics of demographics mean we all need to be putting aside as much retirement cash as we can, rather than relying on the state to keep us comfortable in our dotage. Let's hope that younger investors, who expect to forever enjoy global equity charts that head from the bottom left to the top right, stay the course if the stock market fails to meet their expectations in the coming years.
Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.