The GameStop stock frenzy of 2021 was primarily initiated by a group of young, amateur investors, looking to artificially increase the market performance of some declining companies. This saga has invited overwhelming attention to the participation and motivation
of young investors. A prevailing practice among teen traders is to use social media platforms like Reddit, Tik Tok, and Discord to share bit-sized knowledge about investment. Since the inception of the stock market, the Gen Z investors might be the youngest players in the market. Though this group of investors generally go by the book, it is the frequent use of social media as a tool for investment that distinguishes them from the other investors. Recent awareness about the impact of social media in the stock market has brought widespread attention to teen stock trading and its impact on the global market.
The occurrence of events like the GameStop frenzy combined with an implicit drive to go against the system has lured a number of young, interested onlookers into the stock market. Digitalization of trading apps and the presence of no-fee apps like Robinhood and Acorns have made trading more accessible to the younger generation of traders. These apps focus on simplifying the trading process by using friendly emojis and ‘gamification’. For the veterans of the stock market, the growing concern in that young investors might develop a propensity towards obsessive trading during the pandemic. Teenagers are inevitably getting more time to stay at home and practice trading. Youngsters have a general tendency to pursue thrill. Some are pouring in more and more money just to chase the dopamine of higher and higher returns.
In India, under SEBI rules, a minor can have a demat and trading account, but cannot trade stocks. Most teens circumnavigate around this obstacle by using accounts belonging to their parents or siblings. According to data, there is a linear growth of interest in stocks among young people. The first half of 2020 saw the opening of 5 million new demat accounts. The country’s largest retail brokerage, Zerodha, saw a drastic change in its demography: the users in the age group 20-30 increased by 15%.
A growing trend observed among teenagers is the pursuit of financial freedom. Many teens view the stock market as a haven for financial independence and often end up confusing investment with gambling. Teens from low-income backgrounds tend to have lower financial literacy. Therefore, such teens are more susceptible to putting their live savings into stocks suggested by anonymous tips on social media. Teens often view the stock market as a portal to get rich fast. On the contrary, the stock market is the equivalent of a stretched out football game. Fans can only wait and watch to obtain results. The teenagers want to make a quick buck but there are some advisory services in the market operating unethically. Teenagers often fall prey to programs like ‘dabba trading’, where money isn’t taken upfront but the user is allowed to trade. Investors often fall into the trap to recover the money they have lost, but only end up losing exponentially more.
Personal finance coursework is not a high school graduation requirement in most countries and many teenagers are unaware about the fundamentals of financial literacy. Teenagers are also coming out of an age where the excesses of casino capitalism are especially pernicious: the pandemic has left millions of people out of work, and many have been forced to take up low income jobs in order to survive. Increased stock market participation is a good thing but the markets do not reflect the income inequality and housing instability that is plaguing low-income communities.