There was a lot of conjecture that many of the first-time investors who opened up their first brokerage accounts during the early days of the pandemic would lose interest or wash out as the world returned to normal.

That didn't happen and more new investors have just kept opening accounts, finds the latest study from the Finra Investor Education Foundation and the National Opinion Research Center (NORC) at the University of Chicago. The team of researchers, which surveyed investors in 2020 and repeated the exercise during 2021-2022, found the influx of new investors into taxable, non-retirement accounts has remained steady, albeit with some interesting characteristics—namely, some enter through cryptocurrency accounts—since 2020.

"Our research shows that the influx of investors into the market during the pandemic was not simply a fad. We continue to see the investing population diversify and expand as investors enter the market through traditional routes and in new ways, such as through cryptocurrency,” Finra Foundation President Gerri Walsh said.

Finra and NORC found the following:

• The flow of investors did not slow down: The new brief found “no meaningful difference” in the proportion of the U.S. adults (4.2%) who opened new taxable brokerage accounts in 2022 compared with 2020 (3.6%), suggesting neither the shutdown nor its aftermath slowed investors’ interest in investing for the first time.

• Cryptocurrency is on the rise among new investors: In addition to those who entered the market for the first time through a taxable investment account, another 5% of new investors first started investing through cryptocurrency purchases. Nearly 32% of 2022 new account investors also reported owning cryptocurrency, the report said.

• What is motivating the crypto interest?:  A friend’s suggestion was their primary reason for investing, more than 30% of the new cryptocurrency investors said. But it is a relatively short-term proposition for some. More than 25% (27.9%) of new cryptocurrency investors also said they planned to sell holdings in less than one year, compared with only 2.5% of new account investors.

• First-time investors have low investing knowledge: General investing knowledge and knowledge about cryptocurrency were low for both 2022 new account investors and 2022 new cryptocurrency investors, the report said. When asked about their knowledge of crypto, new crypto investors “less frequently recognized their knowledge limitations, with less than half (44.9%) reporting low or very low subjective knowledge, despite exhibiting low objective knowledge about cryptocurrency,” researchers said.

"The data are clear that new investors, many of whom have been attracted to the markets through newer products such as cryptocurrency, are eager to learn more about investing. And we can expect that they will seek educational experiences from multiple sources. It helps when sound fundamentals about investing are readily and widely available," Finra Foundation President Gerri Walsh told Financial Advisor magazine.

When asked why they opened a new investment account or purchased cryptocurrency for the first time, 2022 new account investors and crypto Investors both cited the ability to invest with small amounts as an important reason why they opened up their first account.

Distinctly, crypto investors "expressed a consistent level of ‘fear of missing out (FOMO)’ on a potentially lucrative investment opportunity,” the researchers said.

New account investors also reported receiving funds that they were able to invest as the catalyst for opening their account. Overall, however, there were a few differences between 2022 new investors and 2022 crypto investors when it came to reasons they began investing, Finra reported. 

In addition to gaining valuable insights into new investors, the findings help the self-regulatory organization create policy and regulatory programs to ensure firms and registered representatives are aware of new investor motivations and limitations, Walsh said. “Gaining insights about the behavior, knowledge, attitudes and demographics of new investors can help us better our ability to protect investors,” she added.