Young investors are driven by competition and hype when making investments.

That’s the conclusion of a new survey which found that three-quarters of younger, high-risk investors say they feel competitive when investing in high-risk products.

The Financial Conduct Authority (FCA) research coincides with a new InvestSmart campaign designed to help investors make better-informed decisions.

The survey of 1,000 people aged 18 to 40, who invest in high-risk investments, found 76% felt a sense of competitiveness when investing their money.

More than two-thirds of respondents likened it to gambling. And only a few of those surveyed said they were investing for the long-term.

Only 21% of respondents considered holding their most recent investment for longer than a year, and only 8% for more than five years.

Despite these investing intentions, 60% of those surveyed said they prefer more stable returns than those highly volatile short-term investments.

A significant driver behind the take up for high-risk investments is hype on social media, with 58% of those surveyed saying they agreed constantly hearing about a particular investment on the news, on social media or from other people encouraged them to invest.

The FCA expressed concerns that new investors are increasingly accessing higher-risk investments that might not suit them or reflect their tolerance for investment risk.

Read how young investors are taking risk and the influence of Instagram & TikTok

As part of their Financial Lives survey, earlier research from the regulator found that while those who have invested believe themselves to be more knowledgeable about financial matters than the general public. This belief was despite most those buying speculating with foreign currency exchange (forex) or crypto incorrectly thinking the FCA regulated them.

The absence of regulation means investors do not benefit from any investor protection and increased risk to their money.

Supporting the InvestSmart campaign is Charlotte Worthington, Olympic BMX gold medallist. Worthington said:

“BMX is about big risk, and big reward – but it has taken a lot of preparation to get to this point, with highs and lows and hours of training to get the basics right one trick at a time. Anything high risk might not always go to plan, it’s about being prepared and minimising your risks through research and information.

“For example my first run at the Tokyo Olympic Games didn’t quite go to plan, but because I had prepared properly I was able to get it right in the next run. It’s all about the smaller calculated risks in practice that don’t always go to plan, to gain the right experience to pull off something bigger at the right time.

“When it comes to investments, I would only take on high risks if I felt like I’d done enough research and I was properly prepared.”

The InvestSmart campaign is designed for inexperienced investors, thinking about investing money for the first time.

Sarah Pritchard, Executive Director of Markets at the FCA, said:

“We are seeing more people chasing high returns. But high returns can mean higher risks. We want to give consumers greater confidence to invest and help them to do so safely, understanding the level of risk involved.

“With our InvestSmart campaign we’re taking an innovative approach to reaching those tempted by high-risk products so that they can better understand the risks and where to get advice. We will be targeting people online and through social media, helping ensure inexperienced investors don’t get played. Together with a more assertive approach to finding and taking action against scammers, we hope InvestSmart will help people invest confidently.”

The FCA is encouraging consumers to be InvestSmart when thinking about investing. In particular, it recommends ‘5 important questions to ask yourself before you invest’:

1 – Am I comfortable with the level of risk?
2 – Do I understand the investment being offered to me?
3 – Are my investments regulated?
4 – Am I protected if the investment provider or my adviser goes out of business?
5 – Should I get financial advice?

Read more about the FCA’s InvestSmart scheme