15% of Current Investors Began Building Their Portfolios in 2020

15% of Current Investors Began Building Their Portfolios in 2020

According to a recent Schwab survey, the pandemic has spurred a new generation of investors hungry for investment education
using investing app

The coronavirus pandemic has transformed almost every aspect of our lives, from the way we work and learn to our hobbies and shopping habits.

New findings show that the health crisis and the resulting economic uncertainty and stock market volatility has created a new generation of investors as well.

A new Schwab survey discovered that 15% of all current American stock market investors first started in 2020. And despite the fact that they're not as well-off as investors that began earlier than 2020, this new generation is optimistic and willing to learn more about investing.

Generation Investor has less money, but more age diversity

Jonathan Craig, Charles Schwab senior executive vice president and head of Investor Services, describes this new cohort of investors — called "Generation Investor" — as "the large number of people who are bound together not by their birth years but by when they got started in their investing journey — who are now on a path to ownership and reaching their financial goals."

Generation Investor (Gen I) boasts a lower median age than that of their predecessors — 35 versus 48 — but its members come from all age groups, including:

  • Millennials (51%)
  • Gen X (22%)
  • Gen Z (16%)
  • Baby boomers (11%)

Compared to their predecessors, this generation also has less to work with financially, an issue that’s been exacerbated by the COVID-19 pandemic.

Schwab found that Gen I investors typically earn about $76,000 a year ($20,000 less than pre-2020 investors), with 51% living paycheck to paycheck. Almost 4 in 10 in Gen I (39%) reported their finances taking a hit during the pandemic as well, compared to only 28% of more seasoned investors.

Gen I, however, has taken these setbacks and used them to take their financial literacy to the next level.

New investors lack comprehensive knowledge, but are willing to learn

Motivated by the financial conditions caused by the pandemic, 54% of these new investors started their portfolio to build an emergency fund, while 53% wanted an additional source of income. Among this group, 41% revealed that they've kept track of their finances better since they started, as well.

Still, Gen I also acknowledges that there’s much they don't know about investing. Although 38% of respondents have a written financial plan in place, Schwab found that 41% haven't thought about the tax-efficiency of their portfolio and 51% still don't fully understand how fees work.

However, the survey showed that Gen I investors are interested and want to learn more:

  • 94% "want access to information and tools to do their own research"
  • 90% "want educational materials to improve their investing skills"
  • 82% "are interested in access to an investment professional to provide ongoing help and guidance"

Other surveys have shown similar sentiments, even across income levels and age groups.

A recent survey from Ameriprise Financial, for example, found that 63% of Americans with at least $100,000 in investable assets that didn't have an emergency fund are now amending that. Meanwhile, Greenlight Financial Technology showed that 3 in 4 US teenagers don't feel knowledgeable about personal finance, but are eager to learn.

In spite of the many challenges Gen I investors have experienced due to the pandemic, the members of this generation still remain hopeful for the future.

Almost three-fourths of respondents (72%) said they are "optimistic about the U.S. stock market," compared to 63% of pre-2020 investors. In addition, 57% believe that the stock market will increase in value this year — a 13 percentage point increase over pre-2020 investors.

Once the pandemic is over, Gen I investors plan on improving their financial situation even further. Some of their biggest priorities include:

  • Saving more (52%)
  • Investing more (43%)
  • Reducing total debt (42%)

Methodology: Schwab and Logica Research conducted an online survey between Feb. 1 and Feb. 16, 2021 of 1,000 Americans ages 21 to 75, in addition to a comparison group of 200 investors who began investing in 2020.