May 30, 2024


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Trading apps: Stocks as a “trend games” for boys

With trading apps like Trade Republic, Flatex and soon the Austrian provider Bitpanda, you can quickly and easily invest in stocks and funds using your smartphone, with little or no transaction fees. More and more people are hoping to make high profits from this in only a short time. According to Deutsches Aktieninstitut (DAI), every sixth person in Germany is now investing in stocks.

The investment is especially popular with boys: among those under the age of 30, there is an increase of 67 percent – that’s nearly 600,000 stockbrokers in Germany. A general trend towards stocks can also be observed in Austria: every fourth person is currently considering buying securities, as shown in a recent survey conducted by the Equity Forum. In 2017 it was only 11%.

Trading-Apps als Trend

Gamification has reached the capital market: small investors want to make money quickly through trading apps. But this does have risks.

Direction from USA

Stock trading in the US has been around for a long time. There, with Robinhood, the hype around trading apps began in 2013. The app now has over 13 million users. The number has increased dramatically since the start of the Coronavirus crisis.

According to the operator, many of the new investors immediately invested the Coronavirus aid distributed by the US government in the amount of 1,200 and 2,400 dollars in circulation. Precisely because that amount was invested in Robinhood’s app last spring.

GameStop Hype

This was also seen earlier this year, when shares of US retail video game chain GameStop rose – sparked by hype around sharing on the social network Reddit. There, young investors motivated each other to buy the stake. Most of them are through trading apps like Robinhood in the US and Trade Republic in Europe.

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Some young investors wanted to teach a lesson to the big hedge funds that had been speculating about falling prices for the company, which it was thought was dead. Others hope to get quick money from it. A risky action, as it became apparent shortly thereafter: GameStop’s share crashed just as quickly as it did so. Many young traders who arrive late at a very high price have already lost a lot of money in the process.

In addition, the GameStop hype revealed a previously overlooked flaw in trading apps: apps like Robinhood and Trade Republic simultaneously stopped buying GameStop stocks for their users. Small investors saw themselves slowing down their earnings trajectory and felt the presence of market manipulation. That’s why Robinhood is being investigated in the United States. However, the company denies the allegations.

Lots of new investors

The trend of the US trading app extended to Europe some time ago. Here, too, the coronavirus crisis will reinforce the current boom in online mediators, says Christian Hecker.

He is the founder of Top Dog Trade Republic, which was launched in Germany in 2019. “The epidemic has brought more people into the capital market, and that has definitely helped our growth.” According to the founder, one of the traits of new clients is that more than half of them have not invested in the stock market before.

First profits

18-year-old Victoria Izdipska from Vienna is also new to stock. Her enthusiasm for securities began with a semester abroad in the United States. A year ago, it opened its first portfolio with a Tadawul app: “The trading apps are easy to use and you can use them to buy and sell securities quickly and easily. In addition, the transaction costs there are lower than in the bank.”

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Meanwhile, the 18-year-old is already making her first earnings from her mobile phone and she herself is providing advice to people who want to invest. Along with four other young shareholders, she runs a startup with the goal of getting young people like her to buy shares.

Conservative investment forms like a savings account have become unattractive to many young people like them because interest rates are now so low. “In principle, I think a savings account is a very bad investment because it doesn’t even outpace inflation. You are making a loss when you invest in a savings account,” she says.

Equity as a “New Pension Scheme”

Young traders see their future financial prospects accordingly. “We are young, not many children will come. The best politicians can sit in parliament there, and sometime it just won’t work with a pension,” says Thymo, 22, a hobby dealer from Tirol. That’s why you need to take the future into your own hands and start investing in the capital market at a young age, says Tyrol.

Trading application


Mobile dock for the thrill

Financial expert Nicholas Gilch of the Foundation for Liberal Economic Thinking is watching Austria’s agenda this development as well: “Many young people see their parents retiring and not getting a sufficient pension. They want to face this, so they are now getting into the equity business.” However, he doesn’t care. All small investors make long-term capital investments, and the excitement and quick money are attracting many young people to the stock market.

Dangerous “gamification”

Critics also accuse trading apps of lowering the ban on risky speculation: “The disadvantage of these apps is that they move quickly toward gambling and gambling.“ It’s very easy to participate, ”Gilch said. With the US app Robinhood, for example, rain appears from scraps of paper when making A purchase.Critics accuse Robinhood of luring young users into making impulse purchases.

Push messages that specifically call attention to individual stocks lure traders into risky trades. This is evidenced by a new study by the University of St. Gallen, which observed the behavior of 240 thousand customers of an online broker for a period of two years. As a result, users trade more frequently after receiving notifications on their mobile phone and also risk more trades.

Losses are part of it

One particularly risky investment is trading in derivatives, which can lead to high returns, but also high losses. “The biggest losses usually happen the sooner the biggest gains are made,” says Thymo, 22. “Because then, you think you are smarter than anyone else.” But this often turns out to be a mistake. Thiemo himself almost gave up on investing once when he was totally wrong and bet on all his gains again.

“You always have to factor in losses,” says 18-year-old Victoria. Especially with high-volume deals, one has to be wary. Expert Gilch also warns against over-investing. Trading is not about fun and excitement. Instead: “Investing should be boring. This shouldn’t be more exciting than a savings account.”