Buyer Beware: The Rise of Digital Investing and Why Education is Critical

The COVID-19 pandemic prompted a global surge in the taking up of at-home hobbies: from cooking, to needlework, to video games…to investing. The perfect storm of lockdowns, stimulus payments, low returns on cash savings, and social media buzz has resulted in an influx of new retail investors to the market.

Retail broker eToro reported that one-third of its more than five million users joined the platform in 2020, and trading volume increased to $1.5 trillion a fivefold increase over 2019. U.S. based brokerage Charles Schwab found that 15 percent of current retail investors began investing in 2020, and that their median age of 35 was more than a decade younger than that of investors who started earlier (48). Perhaps inspired by the recent GameStop saga and boom in meme-friendly cryptocurrency, a new, younger, generation is entering the markets with a “do-it-yourself” approach to investing.

In the U.K., the unique Football Index betting platform capitalized on newcomers’ appetite for investing by positioning itself as a “stock market” for football. Launched in 2015, the Index invited “punters” (users) to “buy shares” in professional footballers, whose “share price” increased as their performance improved, yielding “dividend” payments to the punters.

Recently, the platform announced a reduction in dividends, prompting a crash on the exchange and a suspension of all trading activity, leading to calls of a Ponzi scheme. Users who spoke to the BBC, some in their early twenties who started betting as teenagers, reported losing significant savings, up to tens of thousands of pounds, as a result of the Football Index’s collapse.


The Football Index wasn’t an actual investing vehicle (although it did advertise itself alongside legitimate investing platforms), but amateur investors playing the real markets online without adequate guidance or financial education may also be taking bigger risks than they realise.


For example, forex trading, the trading of fiat currencies, is an area where amateur investors are vulnerable to financial losses due to lack of proper education and a swathe of online ‘get rich quick’ schemes. In addition, many on-trend investing platforms, exchanges and social media influencers encourage risky day trading rather than prudent long-term investing. While day trading and digital assets like cryptocurrency aren’t inherently harmful and can form part of a wider responsible investment strategy, the platforms and apps that profit from retail investors’ participation in these activities are not exactly advertising the fact that they are high-risk methods for for saving, or for investing funds that one cannot afford to lose.


The cautionary tale of the Football Index and other buzzworthy online investment trends begs the question: is “caveat emptor” an appropriate approach to digital investing?


Making investing more accessible to younger generations is, on its face, a positive development. But does that increased accessibility carry a greater responsibility for governments, regulators, and educators to inform consumers about the risks they take when they buy cryptocurrencies or trade equities online? And should platforms like the Football Index be prohibited from positioning what is essentially a form of gambling as “investing?”

Whether regulators will crack down on these new types of investment schemes and misleading communications remains to be seen. But in the meantime, newly minted retail investors looking to establish a nest egg should consider whether they need to resist the temptation to risk their life savings on a social media fad or a sports-driven gamble.

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