Millennials are quitting jobs to trade meme stocks and Dogecoin. But do they even understand investing basics?


Cryptocurrencies are the poster child of the market boom in the pandemic. But most Americans lack knowledge around them.

Cryptocurrencies are the poster child of the market boom in the pandemic. But most Americans lack knowledge around them.

Hamez Trezhnjeva became so enthralled with stocks and Dogecoin during the coronavirus pandemic last year that he decided to make day trading a full-time gig this summer.

The 27-year-old Albania immigrant recently quit his job as a bartender at a French restaurant in Manhattan to spend more time trading on his phone. His decision was sealed when he became frustrated that his work income was just 20% of his earnings prior to being laid off from another bartending job last year.

“I kept thinking about all of the lost opportunities … to make even more money day trading,” says Trezhnjeva, who lives with his wife, Gabrielle, in Bayonne, New Jersey. “I was going into work to make money, but I could have made at least twice that amount if I was at home spending more time investing.”

Gabrielle and Hamez Trezhnjeva, of Bayonne, NJ, trade cryptocurrency from their laptop or phones. Monday, August 2, 2021.

Gabrielle and Hamez Trezhnjeva, of Bayonne, NJ, trade cryptocurrency from their laptop or phones. Monday, August 2, 2021.

Meme mania pushes millennials, Gen Z into the stock and cryptocurrency markets

The fear of missing out (FOMO) on record-high stock prices and the boom in cryptocurrency – or digital currencies – has pushed more young Americans like Trezhnjeva to try day trading and other kinds of investing for the first time. For people who kept their jobs during last year’s COVID-19 recession and are flush with stimulus money and savings, there’s an anxiety to cash in big on everything from GameStop to cryptocurrencies.

It’s easy to see why.

The stock market has surged nearly 100% since March 2020. AMC, a struggling cinema chain, has managed to soar more than 1,490%. Robinhood, the online trading platform that catapulted AMC to new heights, also has been a market darling, shooting up more than 60% since it went public on July 29.

Meanwhile, Bitcoin more than doubled in value this spring, reaching $64,000 in April before briefly tumbling back to below $30,000.

Why young investors have COVID-induced FOMO

All these lofty values and the wealth generated by it have drawn young Americans to investing, even though they have been hit by two “once-in-a-lifetime” recessions early in their prime earning years. The ability to become rich quick seems close at hand.

But the drive to get in on the action comes with big risks. And while the do-it-yourself spirit of day traders is understandable given frustrations with low-paying retail jobs and a distrust of big financial institutions, low levels of financial knowledge leave most Americans at risk of losing more money than they can spare when markets turn volatile or crash.

“It’s like a Las Vegas-style atmosphere where you’re gambling and things can work out in your favor,” says Michael Sheldon, chief investment officer at investment adviser RDM Financial Group at Hightower. “But just as quickly they can turn against you.”

Still, most Americans aren’t familiar with cryptocurrencies

It was only 17 months ago that the COVID-19 pandemic drove down financial markets 34% and sent the economy into one of the sharpest downturns since the Great Depression And while that market collapse was the shortest on record, $9.5 trillion in wealth was wiped out.

That implosion serves as a warning of what can happen to people without a financial plan or solid grounding in investing basics. And it came just 13 years after the Great Recession of 2007-2009 began, prompted by a collapse in the U.S. housing market.

Yet despite both meltdowns occurring within recent memory, many amateur investors in the U.S fall short when it comes to knowledge of finances, markets and investments, according to Wall Street regulators and financial experts.

And one of the newest and most volatile of investments is among the hottest: cryptocurrencies. They are essentially digital coins created and exchanged over a decentralized computer network where transactions are secured and verified through coding.

If Americans struggle with financial knowledge in general, it’s also true they don’t fully grasp the finer points of this asset. Roughly 60% of U.S. adults say they are “not very” or “not at all” familiar with cryptocurrencies, according to results of a Harris Poll provided exclusively to USA TODAY.

Here’s how much lack of financial literacy costs Americans

More broadly, nearly two-thirds of Americans say they understand investing well, though only 20% say they understand it very well, according to Harris.

Literacy appears to correlate with income. About 40% of U.S. households with income over $100,000 say they are “very” literate, compared with only 21% of households with incomes under $50,000, Harris Poll data shows.

Lack of financial literacy and not knowing how to manage one’s personal finances cost Americans more than $415 billion in 2020, or an average of $1,634 per U.S. adult, the National Financial Educators Council estimates.

“When it comes to investing, Americans say they’re sufficient, but not proficient by any stretch,” says John Gerzema, CEO of The Harris Poll. “They acknowledge they’re OK at it, but they haven’t mastered it.”

Americans think they know more about investing than they actually do

This is also a nation where most Americans believe they know more about investing than they actually do, according to data from the Financial Industry Regulatory Authority, Wall Street’s self-regulatory arm.

In a 2020 survey conducted by FINRA, 50% of investors exhibited low investing knowledge, yet their confidence in their investing capability was relatively high, with 71% of investors reporting average or higher levels of confidence in their skills.

Although most Americans may think they’re financially literate, new investors are less likely to have high levels of financial literacy compared with their more experienced counterparts, FINRA data shows. Most younger investors exhibited low levels of investing knowledge, including 57% of 18- to 29-year-olds and 53% of 30- to 44-year-olds.

Key errors young investors make

Young investors are making two pivotal mistakes while trading cryptocurrencies: Their investing time horizon is too short and they’re scooping up too many speculative assets in their portfolios that are risky, according to Yosef Bonaparte, associate professor of finance and the director of external affairs in finance at the University of Colorado Denver.

Cryptocurrencies can see wild swings within a day or even minutes, making day trading dangerous for small-time investors who lack knowledge about them.

“The everyday individual is looking at crypto assets as an investment or opportunity to build wealth,” says Tyrone Ross, chief executive of Onramp Invest, which provides cryptocurrency asset-management technology for financial advisors. “But the majority of people should not be investing in them.”

To be a professional trader, for instance, requires exams and a FINRA license to execute orders for a Wall Street securities or brokerage firm. The average Joe in America, however, isn’t required to do that if they’re day trading for themselves.

“It can work for the right person, but there are so many things that are important before you get there, like having an emergency savings, paying down debt and setting your financial goals,” Ross adds. “If you haven’t done that, you shouldn’t be trading crypto.”

Trezhnjeva says that he’s still learning the in and outs of day trading. He was attracted to cryptocurrencies because he either paid no fee or lower fees to transfer money back to his family in Europe.

He wakes up two hours before the stock market opens to prepare for his day. His wife Gabrielle, a 24-year-old leasing agent at an apartment-rental company, gets texts from him throughout the day, asking her opinion about whether to buy a particular cryptocurrency or stock.

She has been investing for the past five years and helped push himinto cryptocurrency by buying Dogecoin, a popular meme stock that was created as a joke. She predominantly uses the Robinhood and says she feels a rush of validation when she gets congratulated or sees positive emojis for her trades on the app.

“It can get addicting because it’s a sign of reward,” she says. “We get gratification and it’s a big part of the gamification of investing.”

Gabrielle and Hamez Trezhnjeva, of Bayonne, NJ, trade cryptocurrency. Monday, August 2, 2021.

Gabrielle and Hamez Trezhnjeva, of Bayonne, NJ, trade cryptocurrency. Monday, August 2, 2021.

The gamification of investing brings significant risks

James Fielder, an adjunct professor of political science at Colorado State University who has studied Robinhood, wrote in a research paper that “by delighting users, Robinhood creates players rather than investors. This helps them overlook the fact that speculative investing is very difficult and could cause them to lose lots of money – even if they are professionals who spend hours and days scrutinizing companies and trades.”

Fielder adds that Robinhood’s emojis, push notifications and backslapping affirmation emails create a “game play loop” that makes stock trading easy.

Fielder in an interview with USA TODAY said Robinhood’s gift of a free stock to those who join for the first time is a “very powerful” tool to bring in new investors. Yet, he said novice investors should be careful.

“I tried it myself, and I thought, ‘Oh, this is crazy,’” he said.

Fielder says Robinhood allows traders to directly link their savings accounts to the app, which could cause a novice trader dabbling in options or other risky trades to quickly lose their money.

Gabrielle, meanwhile, says that investing classes weren’t offered in her school curriculum growing up. She’s paying off her student debt and currently maxes out her 401(k) contributions because of investing help from her parents. Her husband doesn’t have a retirement vehicle like a 401(k) or IRA.

America lags other countries in financial literacy

Part of the issue with retirement planning and investing, experts say, is that Americans aren’t equipped with much financial education since most states don’t require financial literacy classes for high school students.

As of 2020, 21 states required high schools to teach financial literacy, and 25 states required a high school economics course, according to the Council for Economic Education.

Each year, Americans graduate high school without knowledge of basic life skills like how to keep a budget, file taxes, open and maintain a bank account and save for retirement, according to Bonaparte.

That’s added to a staggering dilemma where two-thirds of states – 35 states including Puerto Rico and Washington, D.C. – earned grades of “C” or less for financial literacy instruction, with just 17 states earning grades of “A” or “B,” according to a study released by the American Public Education Foundation in 2021.

The U.S. ranks 14th in the world for the percentage of financially literate adults, with only 57% of them meeting that standard, according to Standard & Poor’s Global Financial Literacy Survey. Countries with the highest rates include Australia, Canada, Germany, Israel, and the United Kingdom, where about 65% or more of adults are financially literate.

Crypto frenzy pushes millennials to mine for digital currencies

Travis and Carol Stewart, who live in Houston, are mining a cryptocurrency called ether with four computers in a shed in their backyard. Mining is the process that creates cryptocurrency.

Their electricity bill is $250 per month, at least double of what it once was. But they say it’s worth it because they’re making enough money off their ether profits.

Travis, 32, got burned and lost money on a medical stock in his early 20s and decided he had an issue with financial literacy. So, he took a coding course that also had a curriculum on cryptocurrencies at Rice University in his hometown during the pandemic.

“It was terrible losing that money, but it caused me to take a deeper dive and learn more about investing,” he says.

Why young investors are drawn to speculative investments

The pandemic has been a boon for speculative corners of the market like cryptocurrencies, with 68% of owners having possessed it for less than a year, according to Harris Poll.

And much of that is ownership comes from young investors. Overall, just 13% of Americans own cryptocurrency, but among millennials that number is far higher, at 25%.

Younger investors need money to buy a house or a car, or they want to get married or travel. But some of them saddled with debt or low-income jobs aren’t setting themselves up to invest for the next 50 years. They’re doing it for just the next three or four years to cover short-term needs, pushing them to buy speculative assets like cryptocurrency, says Bonaparte.

“The fear of missing out is huge. If you want to gamble like in Vegas, only 2% of your portfolio should be in speculative assets, not 100%,” Bonaparte says. “You can buy cryptos because they have a good run sometimes, but you can’t have your entire portfolio in speculation,” he says. “That’s what we’re seeing with millennials.”

Dan Kearns, whose son Alex committed suicide after he thought he had lost a significant amount of money trading options on Robinhood, agrees with Bonaparte.

Kearns says he believes too many teenagers have become investors by getting caught up in the “outsized influence” of social media and are trying to get rich quick.

“There’s the ‘fear of missing out,’ or FOMO, that seems to rule the day,” Kearns told USA TODAY.”

How some young investors spend their crypto profits

The Stewarts, while young, are taking a measured approach to investing. They paid off their student debt and car payments, padded their emergency savings and have been maxing out their retirement contributions. So, they’ve using their cryptocurrency profits to generate more savings and have even incorporated it into their life milestones.

Travis bought Carol’s engagement ring with about $10,000 he made off ether before the pandemic. Once Carol, 33, paid off her student loans a few years ago, she started maxing out her 401(k) plan and began trading Bitcoin and gave Travis a fancy watch for their wedding with her cryptocurrency profits.

“Young Americans who are investing for the first time may be having fun making money, but we really haven’t had an extended economic downturn or bear market,” says Sheldon, the chief investment officer at RDM Financial Group at Hightower.

“Under those circumstances, younger investors might feel differently about taking risks and their decision-making may certainly change if the markets weaken for a period of time,” he said. “They don’t really teach financial literacy in school, but they should.”

Bitcoin outperformed the S&P.

Bitcoin outperformed the S&P.

Ross agrees.

“I have yet to meet a billionaire who made their billions from day trading,” Ross says. “The greatest investment is education.”

Even so, Trezhnjeva, the young day trader in New Jersey, isn’t worried about his prospects, for now.

“I’m not afraid of leaving my job. I can always go back to hospitality,” he says. “I’m confident that crypto is the future.”


Contributing: Craig Harris, USA TODAY

“Young Investors: Risk and Reward” is a series that examines the aspirations and anxieties of young Americans as they invest money in the current market boom, which is lifting traditional stock prices to record highs and elevating a new, risky marketplace for virtual goods, from digital art to Dogecoin.

This article originally appeared on USA TODAY: Crypto FOMO: Millennials, gen Z face risks in Robinhood, bitcoin boom

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