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Stimulus checks
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46% of people invested their stimulus checks in the stock market?
Here’s what you need to know.
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Stimulus Checks
A new survey from Betterment of 1,500 investors revealed some surprising discoveries about how recipients of the latest stimulus check spent their money.
- 91% got a stimulus check;
- 46% invested at least some of their stimulus check; and
- Of those who invested their stimulus check, 70% invested at least half or less of their stimulus check
That means nearly half of respondents invested their stimulus check — which was intended to be essential money to help recipients weather the financial storm of the Covid-19 pandemic. The third stimulus check was part of the American Rescue Plan — the latest stimulus package — and was up to $1,400 for individuals. In contrast, the same survey conducted last year showed that only 9% invested their stimulus check. For the stimulus check, which was up to $1,200, recipients paid bills, saved and built emergency funds. What is driving the contrast? A likely explanation is that those surveyed are feeling more confident about their financial situation this year compared to last.
How to decide to invest stimulus check
According to the survey, this is how recipients decided to invest their stimulus checks and which stocks to choose:
- Financial news websites: 61%
- Companies whose names I am familiar with: 52%
- Social media accounts or influencers: 42%
- Conversations with my friends and family: 40%
- Business television shows: 31%
How to decide to invest stimulus checks
Betterment
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Strikingly, nowhere in the Top 5 is any mention of conducting independent financial analysis or reading any in-depth financial research before making an investment in the stock market.
Rise of Day Trading and Meme Stocks
The survey also examined the rise of day trading and meme stocks like GameStop, AMC and Blackberry. When asked if they understood what happened in the stock market in January and February regarding the explosion of meme stocks, here’s how they responded:
- 24% of all investors didn’t understand what happened “not well at all”
- 42% of non-day traders didn’t understand what happened “not well at all”
- 50% are active day traders; and
- 49% have been day trading for one to two years.
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This data suggests that not only did many recipients of stimulus checks invest in the stock market, but also many didn’t understand in what they were investing.
