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Cost of Living4:56Vibe investing
Saul Oster just started investing in the stock market this year and says he plans to until he retires.
The 20-year-old University of British Columbia student says he likes the idea of passive income, where his investments make money without much effort from him.
He says most of his friends are investing too. They regularly watch the stock market and trade.
“There are times we’ll be sitting around and someone will tell you to buy something, and you’ll buy it. No research whatsoever, just pure gut feeling,” he told Cost of Living.
Oster and his friends are part of a growing cohort bucking traditional trading wisdom and relying on vibes and life experiences to guide their investment decisions.
According to an Ipsos poll of 1,001 Canadians conducted for CIBC’s Investor’s Edge, 34 per cent of Gen Z respondents said they found financial advice from older generations irrelevant.
They said evolving markets, new financial tools, and changing priorities are the reasons they don’t rely on that advice.
Gen Z is proving to be more financially engaged than the previous generations and diving into investing earlier through RRSPs and TFSAs, according to Statistics Canada and a TD Bank survey, often thanks to finance becoming more digestible through influencers.
The poll also found that 21 per cent of millennials and 19 per cent of Gen Z respondents were encouraged to adopt a risk-taking attitude towards investments, which is more than the general population.
Why people are investing based on vibes
Oster says trades he’s made based on intuition have yielded better results than moves he’s made after researching. His first major purchase was exchange-traded funds (ETF) into Canadian mining companies because he felt energy “was going to be the next big thing.”
“Over the past seven months, I’m up just over 180 per cent,” Oster said.
Instead of relying solely on research to make investment decisions, Oster and his friends use their guts.
He says one friend invested in Walmart because, as a student, that’s where he goes for affordable prices. Oster says he figured other people concerned about their budgets would choose Walmart too.
“It’s paid off but that’s not off research. That’s just because this is what he sees and therefore what he put money into,” Oster said.
Liz Enriquez says most people, not just Gen Z, manage their money based on their emotions, not logic. She’s a personal finance mentor based in Hamilton, Ont., and founder of Ambitious Adulting, an online platform that simplifies personal finances.
She says technology has made investing more accessible, more popular and less elitist.
“Now, the investing ecosystem is essentially the same as online shopping,” Enriquez said.
She says the fear of falling behind financially is a huge motivator for young people who see investing as their only option.
“The messaging has been, you have to invest to get ahead. There’s no way you can just save anymore and buy a house,” Enriquez said.
Managing investment risks
Andrew Aziz says it’s important that people aren’t just investing based on vibes alone. Aziz is the Vancouver-based founder of the online trading community Bear Bull Traders.
His biggest pieces of investment advice for those starting out are to educate yourself and start early. He says building wealth early can help young people pay for milestones like a wedding or a house, and cover expenses that come with having children.
“Those investments from 10, 15 years ago now are coming to help,” Aziz said. “It’s more difficult to start saving at 35 or 40 with a lot of responsibilities.”
Aziz says beginner’s luck can encourage people by giving them a taste of the earning power of investing. He also said losing $10,000 helped him realize the risks.
“Everybody can survive a couple of $1,000 losses or a mistake. But as you get older, your risk appetite should come down because you don’t have enough time or freedom to recover,” Aziz said.
Aziz says one of the challenges facing young investors is not having enough information about the fundamentals of investing, like a company’s background.
Influencers can guide people’s investment decisions by telling social media users what investments are trending and revealing successful investment portfolios and strategies.
But Aziz says people need to remember that most influencers are paid to promote products and they don’t know the future.
“You have to be careful how much of your wealth is going into following these people,” Aziz said.
Artificial intelligence is the latest investing hype, but Aziz urges people to diversify their portfolios because all bubbles pop. He also says users should be weary of fraudulent companies.
As young people like Oster get started, Aziz and Enriquez advise them to dedicate some of their paychecks towards investments to harness the power of compounding interest.
Enriquez says a common mistake she sees people make is holding on to cash instead of investing it.
As Oster continues on his investment journey, he hopes to contribute the maximum yearly amount into his tax-free savings account and make enough to live comfortably, even if that comes with some risks.
“Investing as a whole is a net positive because you only learn when you lose,” he said