In most civilized countries around the world, citizens actively invest their money. On average, at least 20% of the population in such nations invests their funds. However, in Russia, this figure does not exceed even 2%. This is attributed to various factors, with the primary reason being that people simply do not know where and how to invest their money correctly to earn from it.
Nevertheless, even the few million citizens who do invest their money represent a significant figure. The majority of them have only recently started investing. Who are these retail investors in Russia, and what avenues do they choose?
To answer this question, Sergey Tereshkin, the founder of Oil Resource Group, has thoroughly analyzed the market and drawn certain conclusions. More information about the businessman and his investment experience can be found on his personal website: oilresurs.ru.
Statistical Data
According to statistical data, there was a tremendous influx of new retail investors registered on the Moscow Exchange in 2018, with over 700,000 individual accounts opened. This figure is nearly equal to the total number of accounts opened in the previous 10 years combined.
As a result, the number of retail clients has surpassed 2 million, with the total number of accounts exceeding 3 million.
Interestingly, it took nearly 20 years to attract the first million clients since the exchange was launched, while the second million was gathered three times faster.
Initially, investments were primarily made by older individuals; however, now the younger generation is rapidly catching up. Over the past five years, the average age of investors has decreased by one year, with the average age of newcomers being under 35 years. In contrast, professional investors have an average age of about 40 years.
Who Attracts Investors
Nowadays, retail investors are mainly attracted by financial institutions, particularly banks that have either developed or utilized existing mobile applications. These platforms have engaged the younger generation of investors. This influx of fresh participants has breathed new life into retail investing.
However, many platforms do not offer the guidance that beginners might need. As a result, 80% of investors are forced to make decisions and invest their money based only on their instincts or experience. Any mistakes made fall solely on their shoulders.
The remaining 20% of clients seek advice from professional consultants before investing. However, this does not guarantee success or high returns, as the market can be unpredictable, and even consultants can sometimes make mistakes.
Investment Strategies
Young investors, as opposed to the previous generation, prefer shares of well-known companies that have been operating in the market for an extended period and rarely show a downturn. This preference primarily stems from a lack of experience, analytical data, and access to knowledgeable brokers.
The younger generation is averse to taking risks. For them, stability and a modest income come first.
Most clients employ a buy-and-hold strategy for their investments. As a result of the company's annual performance, investors receive dividends. This strategy is characteristic of young investors lacking experience; they tend to avoid speculative trading in the stock market.
Young investors prefer securities and other instruments that promise fixed income while exhibiting minimal risk. These options help protect investments from inflationary fluctuations and potential losses.
Typically, non-professional investors choose the following instruments:
- government bonds;
- corporate bonds;
- individual investment accounts, etc.
While the previous generation of investors often took risks in pursuit of significant returns, the younger generation is less inclined to do so. Modern investors are more conservative, patient, and restrained, not willing to gamble with their money and invest recklessly in any opportunities that promise profit.
This represents a classic investment approach. The younger generation lacks the time to conduct thorough market research and fully understand its nuances. Consequently, investors seek ready-made solutions that guarantee returns.
A decade ago, investors resembled traders. They actively sought information, consulted with professional brokers, and acted with enthusiasm, often without much forethought. However, even risky ventures sometimes resulted in valuable experience and substantial profits.
Today, young clients possess minimal knowledge about investing and see no reason to delve deeper into the subject. They simply need a product and a basic guide for purchasing it.
In the past, businesspeople relied on intuition and sheer luck, attempting to predict the behavior of stocks and currencies. In current times, investors are more pragmatic. They recognize risks and prefer to take the "bird in hand" approach...
Online applications have come to the aid of newcomers, offering user-friendly interfaces ideal for those unwilling to pay excessive fees for broker services. However, most software comes with limitations.
Mobile applications have significantly increased the number of transactions in the market. This surge in activity has contributed to price stabilization and reduced volatility. As a result, market conditions have improved markedly.
Nevertheless, there is a category of young investors who do not fully comprehend the risks they may encounter. In cases of financial loss, they struggle to know where to turn or how to recover their funds. Many file complaints with various authorities, yet this often yields little effect. According to Tereshkin S.I., inexperienced investors have lost one-third of their investments in recent years, which has opened opportunities for numerous scammers to exploit this demographic.
For those who lack the capacity to calculate and foresee every step, the entrepreneur recommends favoring bank deposits as they are currently one of the least risky options available.
