Hargreaves Lansdown warns investors caught up in trading frenzy are putting life savings at risk

Britain’s biggest brokers are warning about the dangers of speculative investing as trading levels soar and customers pile into risky stock market bets.

Trading by customers of Hargreaves Lansdown doubled last year, while data from rival Interactive Investor shows 2020’s record levels are set to be broken in 2021.

Interactive Investor’s clients made 32pc more trades in the first two months of this year than during the same period in 2020. Trading levels over the course of last year were up 50pc on 2019.

Lee Wild, of Interactive Investor, said: “Last year was record-breaking for trading, but in 2021 we have already seen some new record highs.”

This surge in trading activity has been coupled with customers flocking to risky shares. Since the turn of the year, shares in Bitcoin miner Argo Blockchain have been the most-bought by customers of Hargreaves, Interactive and AJ Bell, Britain’s three biggest brokers. The stock is up 4,800pc over the past six months.

GameStop, the American video games retailer whose shares surged from $17 (£12) to a peak of $483 this year before crashing 74pc, is among the top 10 most bought in 2021 among customers of all three. Investors piled in as traders congregating on Reddit, an internet forum, sent shares soaring.

Mr Wild said customer trading had surged after stock markets were hit by the pandemic last year.

That market volatility, coupled with lockdowns that have left those who remained in employment with more disposable income, has led to a rise in speculative investing.

“There will always be active traders and flavour-of-the-month stocks – and these will increase during volatile markets,” he said.

Tom Selby, of AJ Bell, said while greater trading activity was a natural result of volatile markets, “what is concerning is a new generation of investors who are simply investing in things because of what they see on social media”.

Susannah Streeter of Hargreaves Lansdown acknowledged that “some of these speculative shares have become more sought after” by its customers, and that the broker was “helping investors to understand the risks of speculating on hot stocks”.

Hargreaves has this month started displaying a warning to customers on its app, flagging the dangers of stock market speculation, saying those who bought into shares heavily promoted on social media risked “being caught out when the bubble bursts”.

AJ Bell has warned its customers against a “devil-may-care attitude to risk” that comes with investing in speculative stocks.

Interactive Investor said those trying to double their money by buying ramped-up shares were “gambling rather than investing”.

Richard Hunter, of Interactive Investor, said increasing interest in the stock market from younger investors, “with their generally higher attitude to risk”, could be contributing to the rise in trading levels.

“The worry is that people investing for the first time get their fingers burned and this then puts them off later down the line,” he said. “GameStop will be a painful introduction to investing for some.”

Mr Selby said: “Younger investors still need to do their own homework rather than simply following tips from influencers, some of whom have experience in the markets which can be counted in months rather than years.”

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