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Low-cost, nearly frictionless trading apps are attracting a new breed of investors that trade for fun — but many of those investors don’t understand the risks, the U.K.’s Financial Conduct Authority (FCA) warns.

The FCA published new research examining self-directed investors, which found that a younger, more female, and more racially diverse demographic is using new trading apps.

While the increased engagement with investing may be a welcome development, the FCA expressed concern that these new investors may be taking excessive risks they don’t fully understand in products such as cryptocurrency assets and foreign exchange.

The FCA’s research found that many new investors were motivated by the “thrill of investing” and social factors, rather than by meeting traditional goals like saving for retirement or financing life events.

“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,” the FCA said, noting that 38% of respondents didn’t cite a single functional reason in their top three reasons for investing.

The research also found that, while many self-directed investors often have high confidence and claim to be knowledgeable about investing, they also demonstrate “a lack of awareness and/or belief in the risks of investing.”

For example, 45% of respondents didn’t view “losing some money” as one of the risks of investing. Yet many new investors didn’t have the resources to sustain significant losses. The FCA found that 59% of respondents who had been investing for less than three years said that “a significant investment loss would have a fundamental impact on their current or future lifestyle.”

The regulator expressed concerned that higher-risk products may not be suitable for younger, novice investors.

“[S]ome investors are being tempted — often through misleading online adverts or high-pressure sales tactics — into buying complex, higher-risk products that are very unlikely to be suitable for them, do not reflect their risk tolerance or, in some cases, are fraudulent,” the research said.

The FCA has launched an online ad campaign designed to better educate investors and to prevent investment harm.

“This research has helped us better understand what drives and motivates consumers so we can tell them about the risks involved in these investments,” said Sheldon Mills, executive director, consumer and competition at the FCA, in a release.

The FCA’s research involved surveying 517 self-directed investors between August 2020 and January 2021.