24 October 2016
Many college students are fearless when it comes to investing in stocks because they lack experience and knowledge. Photo: Reuters
Many college students are fearless when it comes to investing in stocks because they lack experience and knowledge. Photo: Reuters

Many college students are reckless stock investors

China’s red-hot stock market is luring ordinary individuals, including senior citizens, homemakers and students, to share in the bonanza.

A media survey shows that 31 percent of college students are playing stocks, with 26 percent of them having invested more than 50,000 yuan (US$8,000) in the equity market.

Even high school students try to get around the age requirement for opening stock trading accounts by using real-time mobile apps.

The promise of quick profits is simply overwhelming for some students, who miss classes to check on stock movements and place orders in the middle of the class.

Their moods, too, have been affected by the swings of the stock market.

One big problem is that many students rely on market rumors to guide their investment decisions. Many of them also treat the stock market like a casino.

But there are fundamental differences between investing in stocks and gambling. Investors have their own philosophy and act more sensibly in the stock market, while gamblers rely mostly on luck.

Many college students totally ignore the possibility of loss and even believe that the government would intervene if there is a risk or a bubble in the market.

It’s a total misconception. Authorities will never guarantee that stock prices will keep on going up.

It is also common in other countries for college students to invest in stocks. But they usually do it through investment funds rather than by monitoring stock movements on their own.

Also, most of their money comes from part-time or holiday jobs. This makes them very sensitive to the need for risk management.

On the other hand, most of the money Chinese college students use to invest in stocks comes from their parents. That makes them bolder in their investment decisions.

Also, most of them are the only child in the family,  making them less worried about incurring the ire of their parents should they make the wrong investment decisions.

As such, they are more vulnerable in case of any setback. In fact, as early as 2007, the spokesperson of the education ministry issued a warning to discourage college students from investing in stocks.

However, betting on stocks has already become a big trend among college students. The key is to help them increase their investment knowledge and enhance their risk management.

Currently, the regulatory framework for the A-share market still needs improvement.

Seasoned investors are much more cautious because they have gone through some bitter lessons.

But college students are more fearless because of their lack of stock market experience and knowledge.

This article appeared in the Hong Kong Economic Journal on June 15.

Translation by Julie Zhu

[Chinese version中文版]

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Senior investment banker

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