Friends and family are key to kick-starting young peoples' interest in investing, according to new research from the Association of Investment Companies.

Family is the main trigger, with 39 per cent of those aged between 20 and 40 saying talking with a family member led them to start to invest.

Conversations with friends and colleagues are also important. Some 23 per cent of younger investors said they started investing after talking to a friend or colleague about it.

A recent study by Fidelity Investments also found that millennials who discussed finances with their family or friends were more likely to start saving for retirement or investing.

But the cost of living crisis is a big barrier to young people wanting to invest, affecting three-quarters of would-be young investors.

We look at what young people are investing in, how and where they are doing it, and round up some expert tips for new investors. 

How young people are investing

The majority of younger people use an online platform to invest, while 17 per cent use a bank or building society and 13 per cent use a financial adviser. 

> Read our guide on how to choose the best (and cheapest) DIY investing account 

Only 11 per cent use an online investment service such as Nutmeg or Wealthify, despite their low charges.

Stocks and shares are the most popular investments with young people, held by two thirds.  

This is followed by riskier cryptocurrency, held by half of young investors. More young male investors held cryptocurrency (59 per cent) than young women investors (43 per cent)

Moneybox research commissioned late last year found that 36 per cent of those aged 18-26 who invest have invested in cryptocurrency. This is significantly more than any other age group and more than the national average of 15 per cent.    

Female Invest, a financial education and community platform, has said that younger women are more likely to invest in sustainable or socially responsible companies than their male counterparts, and tend to opt for funds or ETFs, frequently with a passive stance.

Stocks and shares Isas are the most-used vehicles for young people to invest, followed by workplace pensions and then cash Isas.

> Are you a first-time investor tempted to start putting your cash in the stock market? We debunk the top investing myths for beginners 

How do young people feel about investing?

Research shows that younger investors are generally engaged with their investments. 

Over half the young investors who took part in the AIC's survey said they had checked their investments during the past week, and 29 per cent had checked their investments during the last month.

These young investors reported feeling positive towards investing as well as interested, excited, empowered, confident and calm. 

By contrast, 42 per cent of young investors felt cautious and 14 per cent were worried about investing.

Tips for young investors 

Laith Kalaf, AJ Bell's head of investment analysis, advises those new to investing to 'consider [their] own behaviour when making investment decisions, and how emotionally charged decisions may have resulted in mistakes previously.'

He continues that behaviours such as over-trading can 'pander to our instinctive desire to be in control and simply do something, even when inaction might be the order of the day.'

On the other hand, loss aversion 'leads investors to be recklessly prudent, and we can see that in the high weighting to cash held by many UK consumers' he said.

Brian Byrnes, head of personal finance of app Moneybox said many of its investors 'choose to invest in passive funds rather than hand picking their investments' - and they do this with regular deposits that add up over time.

How to choose the best stocks and shares Isa and the cheapest DIY account  

Young women are more cautious investors

Annabel Brodie-Smith, communications director of the AIC points out that 'women are particularly cautious, with a fifth of female respondents concerned about their lack of understanding of investments in comparison to 9 per cent of men.' 

And 30 per cent of men also said they felt calm about investing, in comparison to just 13 per cent of women.

Financial education website Female Invest explains that women are more likely than men to seek out advice from their social networks when making investment decisions - but they are also less confident in their investing abilities. 

'This often leads them to seek community before placing their first trade, to gain both knowledge and confidence' says Anna Sophie Hartvigsen, co-founder of Female Invest. 

Women also often invest into a fund rather than a share to diversify from the get-go.

Sources of investment information

Young investors are most reliant on people for their investment information, whether this is friends, a financial adviser or turning to family members.

Social media is the next most popular source of investment information for young people, with the most used channels being YouTube, Instagram, Reddit, Twitter and Facebook.

But young investors still use traditional media to get information about investing, with 22 per cent of young people reading the finance sections of newspapers and 20 per cent using books for their information.

Brian Byrnes also highlights the importance of reputable sources of information and breaking down the traditional barriers to investing.

He said, 'Features like spare change round-ups and no account minimums help people take that crucial first step on their investing journey.' 

2023-04-20T06:26:58Z dg43tfdfdgfd