Crypto is by far the most popular target for young Brits investing for the first time, as the appeal of traditional investment vehicles faltered during the bitcoin boom.
Research published by Interactive Investor showed 45% of new investors aged 18 to 29 made their maiden investments in cryptocurrencies last month — more than twice the number of people who had first invested via funds, at 23%.
Investment trusts languished at 13% as one of the least popular routes to investing, while one in five said their first foray was in listed company shares. The research surveyed 1,000 UK adults in the age group between 21 and 25 June.
It comes as the risks of cryptocurrency investing are being brought to the fore in the UK, as the Financial Conduct Authority cracked down on unauthorised providers such as Binance.
Many young people viewed cryptocurrency as a good place to store their savings, with the risky assets ranking above shares, funds and investment trusts. Cash remained king, however, with 20% of respondents opting to use it for the lion’s share of their savings.
More than 2.3 million Brits had invested in cryptocurrencies as of January, prior to the sector’s significant 2021 price rally which saw the price of bitcoin rise as high as $64,829 in April. The cryptocurrency now sits around $34,000, and has struggled to break past the key $40,000 threshold in recent weeks.
“Unfortunately, the risks and volatility of cryptocurrencies aren’t always laid bare,” said Myron Jobson, personal finance campaigner at the digital fund manager.
“The worry is if young investors get their fingers burned, it can put them off investing altogether and miss out on a golden opportunity to help build their wealth through sensible, long-term investing.”
A fifth of respondents said they had invested in bitcoin at some point, with half of those surveyed saying they used a form of debt to fund the investment. Around 23% turned to credit cards, while 33% said they used a loan.
“Young adults using credit cards, student loans and other forms of debt to invest is a worrying trend,” added Jobson.
“There is the possibility of damage to your credit score if repayments aren’t met which can seriously hinder your ability to get a mortgage and access other forms of credit in future. It simply isn’t worth it.”
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