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New investors are breaking the traditional mold when it comes to investing, CNBC survey finds - CNBC

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There's something different about the flood of new investors who entered the market in the last 18 months.

They are younger, more diverse, use technology to make trades and turn to social media to learn about investing and research investment ideas, a new CNBC/Momentive Invest in You survey found.

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.

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The distinctions between the two groups are particularly clear when it comes to what they are investing in, how they make their trades and where they do their research.

New investors are more than twice likely to own cryptocurrencies compared to their more seasoned counterparts (26% vs. 12%) and are three times more likely to use a self-service mobile app as their primary way to buy and sell investments (63% vs. 20%).

Social media also plays a big role for new investors. More than a third said they used social media to research investment ideas, compared to 15% of those who began investing in 2019 or earlier. On the flipside, only 9% researched investment ideas through direct discussions with a broker or financial advisor, compared to 29% of the more seasoned investors.

It's not surprising that new investors are getting excited about the market. The S&P 500 jumped more than 14% in the first half of 2021. New investors piled into trades like cryptocurrencies and meme stocks, such as GameStop, which ran up earlier this year, and AMC, which hit all-time highs in June.

"We are in the instant gratification era and often we allow that to drive a lot of our investment decisions, when we really need to look at investing in from long-term perspective," said Matt Aaron, founder and CEO of Washington, D.C.-based Lux Wealth Planning, an affiliate of Northwestern Mutual.

In fact, since most new investors started after the stock market briefly collapsed in March 2020, they have only seen the market go higher, said Tyler Huck, a financial advisor for oXYGen Financial in Atlanta.

"It is fun to do when you are making money, but I don't think a lot of these people have seen the other side of it yet," he said.

Advice for getting started

If you want to start investing, first analyze your financial goals and look at your time horizon. For instance, if you are saving for retirement and it is more than 10 years away, you can feel comfortable taking on more risk in your portfolio.

Your portfolio should also be diversified

"You should have investments that behave differently and allow you to manage some of the risk associated with a concentrated segment of investments," explained Aaron.

Diversification is more than just having a mixture of stocks and bonds, it's also diversification within those asset classes. For example, within your stock allocation, you may have exposure to large cap, mid-cap, small-cap and international stocks. You should also revisit your investments and rebalance your portfolio if it becomes misaligned with your goals, Aaron said.

While you may want to invest in individual stocks, they are difficult to manage if it is not your day job, he said. However, mutual funds, index funds and exchange-traded funds provide you with a basket of companies and allow you to better manage risk, he said.

Meanwhile, if you are thinking about jumping into an alternative investment, like bitcoin, or want to buy the latest hot stock, make sure you put that into a separate bucket from your other investments or savings.

Then, treat those trades like you are going to Las Vegas, Huck advised.

"Have some money you want to gamble with and assume you are going to lose it all," he said.

"It should not be a large portion of your nest egg or emergency reserves," Huck added. "It should be your fun money that you are truly gambling with."

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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