A new breed of thrill-seeking young investors are taking big financial risks when investing in cryptocurrencies, foreign exchange trading and other high-risk products, according to a warning from the City regulator. These younger and more diverse DIY investors were making riskier choices because they liked the challenge and the status it gave them, and were often swayed by the financial and investment influencers on sites such as Instagram and TikTok, said the Financial Conduct Authority. This newer group “tend to skew more towards being female, under 40 and from a BAME background”, it added. The regulator’s findings come against a backdrop of high-profile investment dramas and scandals, ranging from the frenzy of stock market trading linked to “meme stocks” such as GameStop to the recent high-profile collapse of Football Index, the sports gambling platform. Sheldon Mills, the executive director of consumer and competition at the FCA, said: “We are worried that some investors are being tempted … into buying higher-risk products that are very unlikely to be suitable for them.” Investments defined as high-risk include cryptocurrencies such as bitcoin, contracts for difference (also known as CFDs), foreign exchange (forex) trading and investment-based crowdfunding. The FCA commissioned research was aimed at understanding these so-called “self-directed investors” – those selecting investments and making trades themselves without the help of a financial adviser – who were putting money into riskier products. It said this had found that for many investors, “emotions and feelings such as enjoying the thrill of investing, and social factors like the status that comes from a sense of ownership in the companies they invest in, were key reasons behind their decisions to invest”. It added: “This is particularly true for those investing in high-risk products, for whom the challenge, competition and novelty are more important than conventional, more functional reasons for investing, like wanting to make their money work harder or save for their retirement.” In the FCA-commissioned report, researchers from the consultancy BritainThinks uncovered a “striking” lack of awareness or genuine belief in the hazards associated with investing, with 45% of those questioned not viewing “losing some money” as a potential risk. Some of these investors went with options because they had been “hyped” and they had heard a lot about them, while others tended to see investing “on a similar level to betting”. The FCA said this newer group of self-investors were more reliant on YouTube and social media for tips and news, as opposed to newspapers and traditional news sites. Heather Owen, a financial planner at the firm Quilter Private Client Advisers, said: “Social media has been behind the rapid rise in young investors in recent years. On Instagram there are 8.9m posts featuring #investing and 8.7m featuring #finance. On TikTok the numbers are even more stark. Videos featuring #investing have generated over 1.6bn views; videos featuring #finance have generated 1.5bn views. Temptation is all around, and the fear of missing out has resulted in many young investors jumping in, some right at the top of the market.” Owen said the lines between gambling and investing had become “increasingly blurred”.