In an article from NRC, Assistant Professor of Finance at Erasmus School of Economics Ruben Cox elaborates on the increase in private investors and the popularity of investing apps that gamify investing.
According to Dutch market authority AFM (Autoriteit Consument en Markt), investing is booming: during 2020, 160,000 people started investing, adding up to a total of 1.6 million individual investors in the Netherlands. More than half of the new investors is aged 35 or below. Because of low interest rates, boredom, and lower expenditures due to the pandemic, investing by means of apps like Robinhood have skyrocketed.
Gamification
This has led to the so-called ‘gamification’ of investing. Cox explains gamification as follows: ‘You should think of the inviting elements that are inherent to games. Examples are a storyline in an app, which takes you to the next level upon completion. Or badges that you ‘win’ with achievements, such as doing something like trading in a certain market or stock. Another element that influences behaviour, is the usage of rankings. Rankings challenge certain people to reach the top of the list, in particular younger people’.
This gamification has negative consequences, since it can lead people to engage in risky investments. Aggressive marketing techniques are utilised to have people buy very volatile crypto currencies, stocks which they know little to none about and leveraged products such as turbos. According to research by Cox, around 7 percent of all private investors exhibit compulsive and addicted behaviour: ‘They had trouble stopping. It’s possible to draw a comparison with a gambling addiction’.
About Ruben Cox
Guest Professor Dr Ruben Cox specialises in behavioural economics with applications to consumer finance and governance of financial markets. He combines his appointment at Erasmus School of Economics with that of Lead in the Non-Financial Risk Strategy and Digitalization department at ING. Before joining ING, Ruben was a Senior Supervision Officer and Project Manager at the Dutch Authority for the Financial Markets (AFM) in the Capital Markets and Expert Centre division. He has been involved in the redesign and implementation of supervision-strategies across a variety of domains. He teaches corporate finance and business valuation and taught a variety of courses on behavioural finance, real estate finance, and research methods in the past.
- More information
You can read the full article from NRC, 15 May 2021, here.