WSJ Your Money Briefing - Young Men Are Pouring Money Into Risky Assets Like Crypto and Meme Stocks

Episode Date: December 10, 2024

Stock markets have hit a series of new highs in 2024, but a disproportionate number of young men are betting heavily on more unpredictable assets. Wall Street Journal reporter Katherine Hamilton joins host J.R. Whalen to discuss new research showing that men’s attitudes toward masculinity are a predictor of whether they own risky investments like crypto or meme stocks. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Exchanges, the Goldman Sachs podcast featuring exchanges on the forces driving the markets and the economy, exchanges between the leading minds at Goldman Sachs. New episodes every week. Listen now. Here's your money briefing for Tuesday, December 10th. I'm JR Whalen for the Wall Street Journal. Financial professionals often advise against investments in assets like cryptocurrency and so-called meme stocks because of the potential for significant losses. That hasn't stopped a disproportionate number of younger men from pouring money into that end of the market.

There are a lot of different factors driving this, but the main reason that I heard was that taking a big leap of faith in their financial strategy feels like the only way that they can really have a chance at the life that they want, whether that's retiring comfortably or buying a home. Is the reward outpacing the risk? We'll talk to Wall Street Journal reporter Catherine Hamilton. After the break. Amazon Q Business is the new generative AI assistant from AWS, because many tasks can make business slow, as if wading through mud.

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Many young men are making risky investments and are enjoying sizable returns for now. Wall Street Journal reporter Katherine Hamilton joins me. Katherine, what ages of men are we talking about? Broadly speaking, we're talking about men under 40 years old, so mostly men in their 20s and 30s, but sometimes even younger. What types of investments are they putting their money into? Primarily crypto currency, gold, betting of varying kinds, and also meme stocks. How does the percentage of men invested in these risky assets compared to other age groups

and compared to women? Generally speaking, men make up a very slight majority of overall investments, but for these particular investments, they're holding a much greater share. So for cryptocurrency, about 42% of men ages 18 to 29 hold crypto versus 17% of women their age and almost 11% of men between 25 and 34 own both gold and silver compared to about 6.5% of the total U.S. population. And then for betting on this most recent political election, about 85% of those bettors were male and about half of them were under 30.

And that's from Kalshi, which is a political betting platform. Why are men in particular willing to risk so much money in these investments? There are a lot of different factors driving this but the main reason that I heard from the folks that I spoke to was that taking a big leap of faith in their financial strategy feels like the only way that they can really have a chance at the life that they want whether that's retiring comfortably or buying a home. Why is this happening now? Again, there's a lot of different factors. Men in particular, young men are falling behind in terms of higher education,

involvement in the labor force, and so reaching those traditional milestones is becoming more of a challenge. When did we see this trend begin of more men in the market on the riskier side? It's been a gradual increase, you could say, over the last couple of decades. Again, cryptocurrency is relatively new. It came in around 2010 and has been rising in popularity since then.

The onset of the internet has also really fueled this because a lot of young men educate themselves about investing online and there are a lot of young men educate themselves about investing online. And there are a lot of online communities specifically dedicated to riskier investing. Where online are they doing the research? YouTube and Reddit are the ones we hear about a lot, especially, for example, during the meme stock craze in 2021. Those two platforms were really big in terms of communities that came together, talked about the Memes.Gamestop specifically, and helped create that run-up that we saw. Why are those sites in particular so attractive to them? A lot of young men get their start on these online platforms from video gaming.

So starting out when they're younger, there are a lot on YouTube, Reddit, and Discord dedicated to video gaming and that's where a lot of young men find community and then often end up also getting investing advice. And you can also see both YouTube and Reddit the users skew younger and male. So how's it going? What kind of returns are they seeing? Right now the returns are unprecedented. So I created this hypothetical portfolio that includes equal parts cryptocurrency gold, the meme stock GameStop, and the stock for the sports betting company DraftKings.

And the returns on that portfolio were around 62% for the first 11 months of 2024. And that compares to about an 18% return for a more traditional investing portfolio You went through research that analyzed how men's gender attitudes relate to putting money into crypto and meme stocks What were the results the research shows that young men who value traditional masculinity strongly? But feel that they themselves are falling short of traditional masculinity but feel that they themselves are falling short of traditional masculinity,

those are the most likely to own crypto and meme stocks, both of which are really risky investments. So that kind of suggests that there's a correlation about feeling like you're falling short of masculinity and making risky investments that echoes some of those anecdotes that I heard about men feeling like they can't reach those traditional milestones, like being the sole breadwinner of a family or owning a house. What sorts of questions were men asked in this research? There were different surveys asking men to rate how they feel about traditional masculinity. So, for example, do you think it's okay for men to watch soap operas? Do you think it's okay for men to cry? And then in terms of rating themselves

and how they see their masculinity, that sort of showed whether these men thought that they were falling short. These types of investments are often seen as speculative. Does that level of risk concern them? Most of these investors that I spoke to are pretty confident, especially this year. They're seeing big gains, so that

sort of boosts their confidence. But all these investors had also experienced some kind of considerable loss, whether that was during a dive in crypto prices or just a bad investment. And they had all tweaked their investing strategies based on those experiences, whether that was taking their money out of crypto or just educating themselves more about that asset. So overall, these investors are learning from their mistakes. How do financial professionals suggest they prepare themselves for the possibility that the current level of returns might not last?

I would say most financial pros are not going to recommend most of these investments, but if you really are set on investing in some of them, they would probably recommend that you really diversify your portfolio and only contribute a smaller percentage of your portfolio to some of these speculative assets. You mentioned betting earlier. How does the increase in involvement in crypto and meme stocks relate to the rise of sports betting over the past several years? Betting of all kinds involves some sort of financial risk obviously where you're putting your money in something that may not pay off. And sports betting over the last

six, seven years has really risen in the U.S. It became legal in 2018 and now is legal in almost 40 states. So we're seeing a huge rise in popularity. And again, young men are the ones who are really fueling that increase in popularity. So it just adds to this ecosystem where young men have a lot more opportunities to spend their money in riskier ways. That's WSJ reporter Catherine Hamilton.

And that's it for your money briefing. This episode was produced by me, JR Whan, with supervising producer Melanie Roy. Thanks for listening.