How Millennials and Gen-Z Members are Changing the Face of Trading
While the coronavirus pandemic may have been disastrous for many, it has undoubtedly created a number of economic and financial opportunities for individuals across the globe.
This has been borne out by the striking rise of younger retail traders who have entered the financial market through 2020 and the first half of this year, with a GOBankingRates survey finding that some 71.76% of respondents within the 18-to-24 age group having started to trade stocks, forex and cryptocurrencies during the last six months alone.
But how has changed the face of the marketplace and how is the new generation of traders different to their predecessors?
The Face of the Average Investor in 2021
In general terms, it cannot be denied that the modern-day trader is far removed from the stereotypical image of Ivy League or Oxbridge-executed males.
Much of this change has been driven by technological innovation and advancement, with online trading platforms having increased accessibility and enabled retail traders to compete on an even-footing with more seasoned professionals.
Certainly, the majority of new traders are from younger demographics, with the average age of investors having dropped by between 10% and 15% globally over the course of the last decade or so.
In fact, reports suggest that the average client age dropped by five and four years among male and female traders respectively, just between the years of 2020 and 2021.
This leads us neatly onto the rise of female investors and traders, with the huge influx of retail trading accounts launched in the wake of the pandemic demonstrating a sharp increase in the number of women.
This trend was particularly prevalent in the UK and the US, with the former reporting a 9% increase in the number of accounts opened by women (the corresponding number for men was lower at 7%).
According to Goldman Sachs, there’s also an interesting trend for female investors now outperforming their male counterparts across a growing range of markets. This includes professional money management, where 43% of female-managed mutual funds outperformed the 2020 benchmark (compared with just 41% of men).
How Are the New Generation of Traders Different?
Aside from the obvious changes in age and gender (and the exclusive reliance on virtual brokerage sides), what else sets the current generation of traders apart from their predecessors?
To begin with, they’re remarkably hands-on, with Millennials and Gen Z members actively involved in the selection of their broker, associated commission rates and the real-time bid/ask spreads.
Similarly, they adopt a more intensive approach when deciding which instruments and asset classes to trade, while utilising trading platforms to carry out their own, detailed technical analysis and simultaneously manage their risk.
It can also be argued that the new generation of traders are increasingly bullish and aggressive, although this may depend on the region from which they originate and the prevailing economic and financial climate.