Are US Investors Pulling Back From Crypto and Risk-Taking? FINRA Research

TLDR:

• Crypto consideration among US investors fell from 33% in 2021 to just 26% in 2024 despite flat ownership
• Risk appetite plunged to 8% in 2024 from 12% in 2021 as market sentiment shifts dramatically
• New investor participation dropped to 8% from 21% showing significant slowdown in market entry
• Young investors under 35 rely heavily on YouTube at 61% and finfluencers at 61% for decisions

The pace of new investors entering the U.S. market has slowed sharply, according to recent research from the FINRA Investor Education Foundation.

Fewer investors now report willingness to take substantial risks, including in crypto and other speculative assets. Younger investors are increasingly turning to social media influencers for investment advice, signaling a shift in information channels.

Concerns about investment fraud are rising, adding pressure on retail trading behaviors.

US Investors Show Declining Risk Appetite

FINRA’s latest National Financial Capability Study shows only 8% of investors began investing in the last two years, down from 21% in 2021.

The overall share of adults with non-retirement investments remained steady, but younger investors, men, and persons of color reported lower participation. Willingness to take substantial investment risks fell to 8%, down from 12% in 2021, with under-35s dropping from 24% to 15%.

Despite lower risk tolerance, over one-third of investors still feel they must take big risks to reach financial goals.

Younger investors remain active in high-risk behaviors, with 43% trading options versus 10% of those 55 and older. Margin purchases also rose among under-35s, with 22% participating, compared to just 4% of older investors.

Crypto participation remained unchanged at 27%, but interest in new crypto investments declined to 26% from 33% in 2021. Meme stock buying persists, particularly among younger investors, with 29% reporting purchases.

Social media influence is growing, with 29% of investors citing online channels for guidance. YouTube leads as the top source, used by 30% of all investors and 61% of those under 35.

Overall, 26% of investors rely on recommendations from finfluencers, including 61% of new and younger investors. This reliance coincides with knowledge gaps, as respondents answered fewer than half of investing quiz questions correctly.

Information Sources and Education Gaps

Brokerage research tools remain the most popular source of investing information at 75%, followed by financial professionals at 69%. Business articles and peer networks also remain key references for investment decisions.

Concerns about investment fraud increased, with 37% of investors expressing worry, up from 31% in 2021. Despite these concerns, 89% of respondents do not believe they have been personally targeted by scams.

Investors show particular difficulty with advanced concepts, including margin and short selling.

More than half answered these questions incorrectly, with 75% of margin users misunderstanding its mechanics. This highlights a continuing need for targeted financial education, especially for younger or inexperienced investors.

FINRA emphasizes the importance of bridging these gaps to reduce vulnerability to costly mistakes.

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