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Fatal Apptraction

ended 16. March 2023

Investing comparison platform, Investing Reviews, recently published a detailed report into investment apps (which you can read here). It found, among other things, that:

  • A third of investment app users (35%) check their balance every day, with nearly one in ten (9%) returning multiple times a day[1]
  • As the FCA investigates the gamification of trading apps, investors aged 35 to 44 are revealed as the biggest addicts, checking their balance more than 19 times a month on average
  • Nearly half of trading platform users (46%) have three or fewer assets in their portfolios, with a quarter (26%) having less than £1,000 invested
  • 45 different investment apps are now available, with Trading 212 the most popular, followed by Hargreaves Lansdown and Freetrade

Against this backdrop, we are keen to find out if the inexorable rise of these apps is making people - potentially even some of your clients - lose track of the key principles of investing, such as investing for the long term and diversifying a portfolio. Perhaps this ‘Fatal Apptraction’ is also causing you a headache, as you have clients calling you for updates each week as they are wired into a certain real-time mindset? Any thoughts, wing them across. We'll be issuing this to the media on Monday AM so you have a bit of time.

5 responses from the Newspage community

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Philip Dragoumis
Director and Owner at Thera Wealth Management
The fact that investment these days is so frictionless and easy, and can be done and undone in a matter of a few minutes from your phone, has the potential to be hazardous to your wealth. We saw the bubbles that this caused over lockdown with trading sites like Robinhood in the US and similar apps in the UK. Generation Z came to view investing as similar to playing Fortnite with their friends and unsurprisingly this ended badly. It is important to save and invest long-term, and not everybody has the assets and income to afford a financial adviser to guide them. But from a behavioural investment point of view, watching your portfolio go up and down every day will eventually lead you to a mistake, which is the primary reason individual investors have such poor returns. Financial education, currently non-existent in schools, is key.
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Scott Gallacher
Director at Rowley Turton
As a financial adviser, I am concerned that a significant number of investment app users are checking their balances frequently, leading to a limited number of assets in their portfolios. It's crucial to emphasize the importance of having a well-diversified investment portfolio that aligns with my clients' financial goals and risk tolerance, and to remember that investing is a long-term strategy that requires patience and discipline. Research has shown that those who check their portfolios too often tend to make more changes, which can lead to lower returns in the long run. Therefore, as a financial adviser, I encourage clients to focus on a long-term investment strategy and to avoid frequent portfolio check-ins that can lead to unnecessary changes.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
The only people who should be checking the value of their portfolios regularly are fund managers and day traders. Everyone else is likely to be investing for the long term and there is very little to be gained by checking the value frequently. You would not pull out the seeds you have planted to see how they are growing beneath the soil and nor should you do the same with your investments. Doing so will cause an emotional reaction and one of the secrets to being a successful investor is not to make any emotional decisions.
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Matt Cross
Senior Adviser at Elmstone Financial Planning
Obsessively checking your investments can not only be damaging to your portfolio but also to your mental health, particularly in times of high volatility in the markets. That's not to say you shouldn't check your investments at all. And for some investors, having a small percentage of your portfolio in accounts that you trade can be a good way to engage with the financial markets and gain a better understanding of what's happening within the investment world. But for investments that form part of your long-term portfolio, it can be a pointless exercise and potentially damaging to long-term gains, due to the tendency to react to market movements. The key is to have a diversified portfolio of investments and a suitable strategy in place to provide a suitable return over the long term — and avoid the temptation to relentlessly tweak it.
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Fanny Snaith
Owner at Fanny Snaith - Certified Money Coach
Most people using these apps are doing it with small amounts of money. These apps are brilliant for beginners and they do provide an advice gap, because IFAS are often disinterested in clients who are building up their portfolio from scratch with little money. The danger is when the amounts become larger and then not treated seriously, the portfolio runs the risk of being out of balance. More knowledge is definitely needed as the sum invested grows, but does that have to come from an IFA? Not necessarily, these days.