Where the City’s movers and shakers have their say. Today, it’s Max Rofagha, CEO of Finimize, with the pen, talking first-time investors, the Tiktok Olympics and what to add to your reading list
As interest rates come down, what do we need to know about first-time investors?
Following the Bank of England’s first rate cut in over four years, which lowered its rate to five per cent last Thursday, the case and environment for investing, especially for savers early on in their retail investor journey, is more compelling. But what do financial firms really know about the behaviours of first-time investors and what drives them?
Our latest quarterly Modern Investor Pulse spoke to over 3,000 retail investors and found that despite the explosion of financial influencers (finfluencers), robo-advisors and trading platforms, the biggest driver for getting started in investing was a conversation with someone that already invests.
Investing is a very personal decision that requires a lot of trust. Consumers are tired of being sold to and overwhelmed with advertising. Sometimes, having a conversation with someone with no vested interest in the outcome is the best way to alleviate the fears of getting started. If financial firms initiate these conversations themselves, they will build that trust directly and benefit from the halo effect it creates.
Beyond getting started, our research also found that small investment accounts show big potential over time. In fact, almost half (46 per cent) of all long-term investors (those that have been investing for three or more years), started investing with less than $500, and over a third that plan to invest more than $10,000 this year, started with an investment of less than $500. Data shows retail investors’ cash tends to grow with time in the market, which means small novices have significant growth potential, and present an opportunity for financial firms in the long-term.
Investing firms should remember that acquiring customers with potentially large account balances doesn’t have to be a short-term game. Of course you can aim for those already at the higher end, but there’s perhaps an underappreciated opportunity in ‘landing and expanding’ with less experienced investors whose confidence and account balances may grow with time.
What is happening to the stock market?
This week, we saw a dramatic global stock market sell-off. And while higher volatility was undoubtedly alarming, it’s not a reason to panic. It’s simplistic to blame a single factor, whether the Japanese yen or last week’s weaker-than-expected US employment data. Nevertheless, it creates an opportunity for long-term investors to revisit their portfolios and rebalance. For instance, bonds rallied, so investors who are diversified across stocks and bonds will have the benefit of some of their investments rising to offset the fall in others..
Retail Investor Summit
The team at Finimize has been busy planning our annual flagship event, The Modern Investor Summit, designed to connect the smartest minds in investing in December. We have an exciting line-up of speakers who will be sharing their views on the future of our economy, provide analysis on investing opportunities, and offer education on becoming better investors.
We’ve previously had keynote speakers such as the legendary Ray Dalio, a personal hero of mine and an inspiration, who graciously imparted his wisdom to our community. I’m excited to announce this year’s line-up soon so watch this space.
The Tiktok Olympics
I’ve been struck by the power of great content in this year’s Olympics, with streaming platforms offering more live coverage than ever, and the Olympians themselves creating engaging first-person Tiktok videos behind the scenes. This new level of access is transforming how people connect with the Games, and offers valuable lessons for brands looking to engage audiences through storytelling in new and authentic ways.
Something to add to your reading list
The Finimize Podcast hosted by our chief analyst Carl Hazeley is essential listening for anyone looking to make smarter investment decisions. Our world-class analysts break down the latest market stories, alongside leading financial experts who share their insights on the economy, investing and financial markets. Notable guests include Steph Guild, senior director of investment strategy at Robinhood, and Paul Diggle, chief economist at Abrdn, making each episode a highly informative listen.
I’ve also started reading Read Write Own, Building the Next Era of the Internet by Chris Dixon and I’m hooked. It offers a clear, accessible explanation of blockchain technology and its potential to democratise the internet. It’s a valuable resource for understanding the future of the web.