Most of Last Year’s First-Time Investors Will Invest Again in 2022

By James Fattal

Investing.com -- 86% of those who delved into the investment arena for the first time in 2021 plan to invest more in the stock market during 2022, a new survey of U.S. investors has revealed.

According to the survey of 1,646 respondents (479 of whom invested for the first time in 2021), first-time investors are younger (63% from Generations X, Y, and Z, compared to 45% of other investors); earn less personal income (24% above $100,000, as opposed to 49% of more experienced investors); and are more likely to be female (37% versus 17%). They are about twice as likely (42%) as other investors (19%) to use Reddit or other social media platforms to inform their investment decisions. Further, they are less likely (16%) than their more experienced counterparts (32%) to consult with a financial advisor.

“A new generation of retail investors, which entered the stock market during the pandemic, is turning it on its head,” said Jesse Cohen, senior analyst at Investing.com. “This group is more upbeat than the older generation and they're doing their own research on social media platforms, like Reddit, TikTok, and Twitter, instead of paying attention to the Wall Street analysts.”

First-time investors are also far more likely to take perceived risks. 58% include cryptocurrencies in their portfolio, compared to 37% for experienced investors. Similarly, they are more inclined to purchase meme stocks such as AMC Entertainment (NYSE:AMC) (29% for first-timers versus 10% for other investors) and GameStop (NYSE:GME) (15% for first-timers versus 8% for others). Significantly more first-time investors (37%) than others (21%) also report that they trade for short-term gain.

“The rise of the first-time retail investor has changed the entire character of the market,” said Cohen. “They’re much more inclined to invest in risky meme stocks and cryptocurrencies than the older generation, so the professionals are no longer the only force that matters.”

In terms of trading platforms, 36% of first-time investors use Robinhood (NASDAQ:HOOD), the financial services company which generated significant buzz over meme stock investing in 2021. Only 15% of more seasoned investors use Robinhood, compared to 32% who use TD Ameritrade and 28% who use Fidelity. At the same time, 26% of first-time investors also use TD Ameritrade, while just 15% use Fidelity.

Perhaps unsurprisingly, a greater number of experienced investors (87%) than first-timers (67%) reported a profit from their investments in 2021. Yet looking ahead, it's first-time investors who are the more optimistic about the future of the markets - with 84% expecting the stock market to increase in value during 2022, compared to 75% of other investors.

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“After wrapping up another strong year of gains in 2021, there are plenty of reasons to be cautious about the stock market in 2022,” Cohen added. “Looking ahead, stocks look set for a volatile year amid risks related to the Federal Reserve’s tightening plans and the ongoing coronavirus health crisis.”