Young retail investors may be too bullish on stocks

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Global survey finds more than half of respondents aged below 51 expect make at least 10% a year in the next five years

The Robinhood crowd came to the fore this year, with their enthusiasm for meme stocks making them a force for professional traders to reckon with. Pandemic lockdowns sparked a wave of interest in day trading, and with it rose the dangers of misunderstanding the boundary between investing and gambling. Still, retail buyers’ appetite for risk shows no sign of abating.

One of the most striking data points concerns the stellar returns many respondents expect to make. More than half of those aged below 51 anticipate making at least 10% per annum in the next five years. While double-digit gains feel like they’ve been the norm for the S&P 500 in recent periods, total returns since 1999 lagged at less than 6% in four of those years and ended up in the red in five others, even as recently as 2018 and with 2008 negative to the tune of more than 37%.

Taking on more risk is the strategy those younger investors are pursuing to juice their returns. About 44% in the lowest age bracket say they’ll buy high-risk securities, compared with just 28% aged between 51-70. While younger investors have longer time horizons that allow them to take a more speculative stance, that gap strikes me as rather wide.

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