- New data finds that investors’ fear of losing out (FOLO) when investing outweighs their fear of missing out (FOMO)
- However, very few investors think they should reduce their risk taking. In fact, 84% of retail investors believe that they have the right amount of risk or should take on more in their investing strategies
- 62% feel more positive about investing in the markets now than when they started
December 15, 2023 – U.S. retail investors are more scared about the prospect of losing money than possibly missing out on the next big opportunity according to new research from trading and investing platform eToro. eToro’s Rethinking Risk research reveals that 61% of U.S. retail investors say that their investment approach is influenced by the fear of losing money by taking excessive risk, compared with 31% who are guided by fear of missing out on the next big thing.
Their actions, however, tell a different story as large numbers of retail investors still report investing in riskier assets, including 70% who hold single stocks and 41% who hold cryptoassets in their portfolios.
Commenting on the findings, eToro U.S. CEO Lule Demmissie said, “The current narrative around investment risk is a binary framework of high or low risk tolerance. However, our latest research paints a more nuanced picture of cognitive conflict among investors when making decisions and evaluating assets for their portfolios.”
Younger Investors Are Building Skill With Risk
The cognitive dissonance between fear of losing money from taking on risk while investing in riskier assets is especially evident in those ages 18-34, with 67% holding individual stocks and 57% holding cryptoassets. At the same time, the three biggest perceived obstacles in achieving their goals in this age group are: fear of losing money (27%), lacking sufficient knowledge (20%) and not taking enough risks (18%).
Lule Demmissie added, “It’s encouraging that investors are rethinking risk. It is on us as an industry to help coach them on the importance of practice and resilience, rather than repeating the ‘buyer beware’ siren calls of 2008. We cannot let another generation lose out on years of market participation due to fear. Risk is the reality of investing for everyone. You have to build both skill and comfort in taking risks before it can benefit you. The only way for investors to get better at risk-taking is to give them the platform and knowledge to do it in increments that best suit their situation and investing objectives.”
Long Term Retail Investors Are Building Comfort With Risk
84% of investors feel they take just the right amount of risk or could take on more risk when constructing their portfolios. Less than 7% believed they should reduce risk.
Retail investors are willing to invest in assets often viewed as riskier – such as individual stocks, options and crypto – because they are taking a long-term approach to investing (41%), they are learning to diversify their portfolio (38%), they are learning to be better risk takers (38%), and they have learnt from family and friends sharing previous experience (29%).
Over 62% feel more positive about investing in the markets now than when they started. By contrast, 23% feel less positive about investing versus when they started their investing journey.
“We are seeing in real time how retail investors are applying learnings from previous bear markets and weathering the storm with their long-term investing goals in mind. Retail investors are showing how they have learned from the 2008 bear market and fiscal policy by beginning to rethink their approach to risk in their investments. Through portfolio diversification, finding avenues for practice, and taking calculated risks in pursuit of long-term gains, retail investors continue to display their increasing levels of sophistication and their ability to adapt to today’s markets.” said Lule Demmissie.
ENDS
Notes to editors
About this report
The findings are based on a survey of 1,000 retail investors in the United States.
The survey was conducted on December 1, 2023 and carried out by research company Appinio. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent. They did not need to be eToro users.
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