Millennial and Gen Z investors were lured by the US-based app Robinhood back in 2020 as the pandemic unfolded. Fueled by disposable income from stimulus cheques and time on their hands due to the lockdown, they flocked to commission-free trading.
Then cryptocurrencies crashed. The bull market came to a screeching halt. And they got scarred.
Morningstar's CEO Kunal Kapoor recently spoke with the Australian Financial Review about the need for the industry to cultivate these new investors known as the ‘Robinhood Generation’ as long-term investors.
“People started investing very excitedly and also got burnt very quickly, because they got in too late, and the downside was pretty bad,” Kunal said.
Kunal compared the pandemic era with the tech boom and eventual tech bust of the early 2000s.
“That was when you had a lot of people discovering DIY investing for the first time because the internet was enabling a small investor to make a trade without picking up the phone to a broker. What happened was a lot of the people who found markets in those days ended up never going back to the market. They remained skeptical,” he added.
Kunal urged wealth advisers, fund managers, and fintechs to play a part in preventing a permanent exit from the markets by these investors adding that fintech tools such as micro-investing apps can engage this cohort.
“It benefits society that they remain engaged because in the long run, there are really good outcomes for people who stay invested,” Kunal said.
“We have the tools today to make sure that engagement doesn’t fall off the cliff. The means to allow people to save in small ways and then convert those to investments in small ways exist like never before at a lower cost than ever before.”
The complete interview with AFR.