Almost a third of investors who received government stimulus money during the pandemic invested some of it, according to a new CNBC/Momentive Invest in You survey.
However, younger and newer investors were more likely to put their stimulus money into assets.
Of those aged 18 to 34 years old, 49% did so —15% invested in individual stocks, 11% purchased cryptocurrency, 9% invested in mutual funds and 8% bought exchange-traded funds.
With the rise of investing chatter on social media and the ability to make trades on a mobile app, it’s no wonder people used some of their newfound cash to invest, said certified financial planner Misty Lynch, director of financial planning at Dedham, Massachusetts-based Beck Bode.
“During the pandemic, there were a lot of people who weren’t as distracted with their normal lives,” she said. “We were spending a ton more time on our phones.”
More than a quarter of investors polled started investing within the last 18 months, and 73% began in 2019 or earlier. Momentive surveyed 5,523 U.S. adults between Aug. 4 and Aug. 9, 2021; of those, 45% are investors.
The new investors are more diverse, younger, use technology to make trades and turn to social media to research investing ideas, the survey found.
“If it’s just a part of their overall financial picture, it is great,” Lynch said. “If it’s just that ‘I want to make a lot of money really fast and get out,’ I think it can be problematic.”
To be sure, some financial experts have warned against investing stimulus payments, especially if you don’t have an adequate emergency fund.
“The key to your freedom is having that security, that emergency fund,” personal finance expert and best-selling author Suze Orman told CNBC in March. “Keep it right there.
“Do not spend it and don’t you dare use it to invest in the stock market.”
If you want to begin investing, and you have a healthy emergency fund that can cover several months of expenses, the first thing to do is know your time horizon, said New York-based CFP Tom Henske.
He’s against trading crypto or meme stocks.
“Please don’t do that,” he said. “It creates bad habits. Good investing is all about habits and discipline.”
After you know your time horizon, decide how you feel about risk vs. reward.
“If you are the type of person that when the market goes down 2%, you feel queasy, maybe that might change the investment that you are going to buy,” Henske said.
Making sure your portfolio is diversified is also important.
For smaller amounts of money, Henske would either do an index fund or time-horizon fund, which invests based on when you will need the money — if it is a longer time horizon, you can be more aggressive in the beginning since you have time to recover if the market dips.