A study shows that German CFD traders are not as open to new media as expected and are increasingly trading raw materials and foreign exchange. By Emmeran Eder, Euro am Sonntag
Since the beginning of the Corona crisis, many young people have discovered the stock market. But CFD providers can also look forward to an influx of the younger generation. However, this started before the pandemic, as a comprehensive study by the independent research institute Investment Trends on the German CFD market shows. For this purpose, almost 7,000 German investors were surveyed, of whom 1,243 traded between April 2019 and the end of March 2020.
Similar to the stock exchange, despite the increase, enthusiasm for CFDs among young people is still low in an international comparison. Of the Germans who started trading differences during this period, 28 percent are young, i.e. between 18 and 34 years old. That is far less than in Australia, Hong Kong, the USA, France or the UK. According to Investment Trends, the reason for this is that the presence of CFD providers on online platforms and in social media is not yet as developed as in other countries. This is not surprising, because 45 percent of traders stated that they did not use social media. Even 70 percent don’t read financial blogs.
Traders prefer financial magazines
The average age of CFD investors in this country is 49 years, the median is 51 years. Apparently, investors in this age group prefer to use conventional media for information. In the weekly business magazines, Börse Online, Der Aktionär, Focus Money, Wirtschaftswoche and € uro am Sonntag are preferred.
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If social media are used at all, then mainly Youtube, Facebook or Twitter. In addition to the low online presence, the lower willingness to take risks than in countries like Hong Kong or the USA should also contribute to Germany lagging behind when it comes to young traders.
Nevertheless, their increasing interest is a glimmer of hope for the industry, which has lost customers due to regulation by supervisory authorities in Europe and Germany and is now looking for new target groups. This also includes women. So far only six percent of CFD traders in this country are women. Of the investors who intend to purchase Contracts for Difference in the next twelve months, however, it is still eight percent. “We would like to encourage women in the sense of more financial independence to deal more with financial issues. Some of the most successful traders at IG are women,” says Simona Stoytchkova, managing director of CFD broker IG Europe, sees a lot of potential here.
One possibility would be to invite you to webinars or seminars. 35 percent of investors never get an offer for it from their broker. On average, only 21 percent of traders receive an invitation every month in the industry, 19 percentage points more would, however, want one and at least a fifth would like one per week.
So there is still some catching up to do with CFD brokers. This is also the case with traders who previously traded but have not been active for a year. In industry jargon these are “dormants” (English for sleepers). In a European comparison, Germany has the most sleepers with 34,000 people, with the exception of Great Britain, well ahead of France and Spain.
When asked about the reasons why these people are no longer active, they cite the high risk of CFDs and the loss of money with them as the main reasons, but immediately afterwards points are mentioned that can be influenced by brokers. These include high fees, a lack of trust in the provider and training opportunities.
Mobile action: grouches and fans
Apparently, many customers are also not overly enthusiastic about the trading opportunities via smartphone or tablet. 44 percent of trades are carried out on average on the move, but from a global perspective this is only mid-range. In Hong Kong, Australia, and the United States, this number is much higher. In Europe, however, German investors are at the fore.
A distinction can be made between two groups: one third of traders in Germany place between 60 and 100 percent of their orders on the move, while two thirds of investors either do not do so at all or at most 19 percent of the orders. “The broker’s digital offering will play a more important role in the future. Technologies such as trading apps offer the great advantage of being able to react to market developments at short notice and while on the move,” says Stoytchkova, who sees a lot of potential for the mobile grouch.
Lots of Sparkasse customers
The IG managing director is convinced that the topic of old-age provision and asset accumulation will also gain in importance for CFD customers in the future. More than half of the respondents stated that their financial goal was to provide for a pleasant retirement. So it is not surprising that a good fifth of traders have the Sparkasse as their house bank. Direct banks such as Comdirect or ING as well as Commerzbank and Raiffeisenbanken follow well behind.
Raw materials are in demand
However, this rather conservative attitude does not correspond to investment behavior. German indices, especially the DAX, are the most popular underlyings that are traded on – with a share of 70 percent. It is followed by raw materials with 52 percent and currencies with 48 percent, ahead of individual German stocks (multiple answers were possible).
“The trend towards commodities should continue,” said Carlo Alberto De Casa, chief analyst at CFD provider ActivTrades. “Fears of inflation, the corona crisis, but also the growing global hunger for raw materials are responsible for this. It is essential that investors learn to deal with the high volatility. Then they can benefit,” says the expert.
German CFD investors are leaving their broker more often than before. While 15 percent left their provider in 2018, it was 20 percent in 2020. There are various reasons for this: Many customers have multiple accounts and wanted to reduce them. High fees and spreads also bothered 25 percent of investors. In addition, a considerable number were dissatisfied with the service. Other reasons were the quality of the trading platform and excessively high minimum amounts.