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Pandemic Creates Panic Among Young Investors

MU study shows people, especially young people, are more apprehensive about taking financial risks during pandemic.

Story by: Pate McCuien, Show Me Mizzou

Abed RabbaniTaking risks in life can be scary, but it can be especially intimidating right now. The COVID-19 pandemic has caused many to struggle not only physically and emotionally, but also financially. In fact, according to a Pew Research Center poll, roughly four in 10 adults say they or someone in their household has lost their job because of COVID-19.

Like many Americans, Abed Golam Rabbani, an assistant professor in the Department of Personal Financial Planning of the University of Missouri College of Human Environmental Sciences, was tempted to adjust his financial portfolio and divest many of his stocks when the pandemic hit. He was compelled to decrease the amount of risk he was taking on. Ultimately, he resisted these urges, but he wanted to see how the pandemic was affecting others’ ability to keep taking on the financial risk that comes along with being invested in common high-risk stocks.

In a recent collaborative study with University of Georgia and South Dakota State University, he and his colleagues found evidence that people are moving away from taking financial risks during the pandemic. The study analyzed data acquired through the Investment Risk Tolerance Assessment — an MU online financial planning survey with over 231,000 responses — to discover how the pandemic affected people’s risk tolerance or their ability to take on financial risk, like purchasing certain stocks. Rabbani said that when someone’s risk tolerance is decreased, it has a very practical effect on the economy.

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