Brokerage Apps Seeing a Surge of New Investors Amid COVID-19 Crisis
With unemployment now nearing 15% and economic uncertainty abounding, it might not seem like the best time for Millennials and younger adults to start their first-time investing journeys. Alas it seems that that’s exactly what many of them are doing. As Axios reports, there are several signs showing that young investors are interested in playing the markets during this turbulent time.
First, according to data from App Annie, financial apps saw a 55% increase in usage time between the January and April of this year. Meanwhile, the site also notes that TD Ameritrade recorded 608,000 new funded accounts during Q1. Moreover the brokerage’s number of users tripled from March 2019 to March 2020. Similarly Charles Schwab (who is currently in the process of purchasing TD Ameritrade), Fidelity, and E*Trade have also reported record spikes in new user sign ups.
Of course part of this recent growth could be attributed to these firms moving to a no-commission fee trade model late last year. On top of that, FinTechs and now discount brokerages have been finding new ways to attract first-time investors, such as fractional shares trading — something that Schwab just announced it was getting into starting next month. However, Axios theorizes that the strong uptick also has to lot to do with what Millennials have been taught about the stock market, with the site writing, “Having been conditioned for years by financial pundits to see the next recession as their opportunity to get rich after largely missing out on 11 years of a surging bull market, young people are viewing the coronavirus-driven stock market crash as their golden ticket.”
In case there was any doubt that the current rush in sign-ups was led by new investors, TD Ameritrade’s EVP of trading and education Steven Quirk explained to Axios, “The way we can see that a lot of these people are newer to investing is because they are accessing our educational resources at a rate that is three to four times what we’d normally see.” Further driving home the point, Quirk added, “And the courses they’re accessing are explainer video series about investing principles, investing basics, ‘How do I buy a stock?'”
On a related note, it seems that a significant number of users on Robinhood are seeing potential in one industry: airlines. Writing for The Street‘s ETF Focus section, David Dierking notes that the platform has seen a surge of investments in the U.S. Global Jets ETF ($JETS), which is comprised of shares from several major domestic and foreign airlines. Dierking found that, back in February, a mere 250 Robinhood trading accounts owned shares of JETS compared to more than 20,000 today — marking an 8,000% increase. Meanwhile, Berkshire Hathaway’s Warren Buffett recently announced that he’d sold all of the positions he had in airlines following the coronavirus pandemic.
Overall the recent increases in new accounts that FinTechs and other brokerages have seen is a good thing. At the same time, with so much uncertainty ahead, there’s always the chance that these first-time traders could get burned. Luckily, with plenty of investment resources now available, those who do want to learn about long-term market investing can prepare themselves to get started in a short amount of time — we can only hope that’s this is what’s happening now.