Is gamification the name of the game in digital investing?

If the recent explosion of gamification in all aspects of our lives (think: workout challenges, providing online reviews, reward charts for our kids, etc.) has taught us anything, it’s that humans are naturally social and playful creatures. And that can also apply to how we approach money, especially when it comes to investing.

Gone are the days when investing was only for professionals and those with enough money and resources to access investing services. The internet and app-based investing has democratized investing, making it easy to get started and giving opportunity to groups that have historically been shut out. According to our survey data, those who started investing just two years ago or less have lower income, invest smaller amounts and are more likely to be female compared to those who have been investing for a longer period of time.

The new class of investors are curious about the market and eager to take advantage. Our data indicates that two-thirds of people believe investing apps allow access to financial markets they wouldn’t otherwise have, and 63% believe app-based investing is an effective way to make money and build wealth.

And the active users on these platforms have formed a virtual community that serves as a resource to learn more about strategy and help investors think through their investing choices. Nearly half of investing app users are not only trading on the apps, but using them as a resource for investing advice. This new generation of investors also utilize social media platforms for information and guidance, including Reddit and TikTok. And while not all tips and tricks found online are sound, of course, it's inspiring to see the flurry of interest around investing.

App-based investing and gamification may be the future of investing. Gamification has infiltrated nearly all aspects of our lives, and utilizing games to manage your money can come with a host of benefits.

While gamification of investing has resulted in unprecedented access and the potential for more people than ever before to start wealth-building, it does come with unique challenges and risks.

Diversification is a key component of any sound investment strategy and may be difficult to achieve when relying too heavily on gamification. Getting caught up in the latest fad stock and turning a blind eye to the long-term impact could be to your detriment. By investing in the meme stock of the moment, you could also miss out on other opportunities with more long-term potential.

The support and information novice investors can glean from the internet and social media is valuable, but it’s important to avoid getting swept up in trendy (and potentially risky) investments just because of peer pressure — whether that comes from your real-life friends or your investing social media networks.

Gamification is motivational, fun and has broadened access to investing in an incredible way. But our data shows that only 20% of those who have been investing for two years or less rate themselves as knowledgeable about investing, compared to nearly two-thirds of those who have been investing for more than two years. Getting in the game is important, but knowledge is power. It may take some time, along with trial and error, to gain that knowledge, but you should become familiar with the risks before you begin “playing” with your investment strategy.

Having safeguards in place is another way to avoid spoiling the fun. Evaluate your risk tolerance before going all-in on an investment, and make sure your choices align with the potential loss you’re willing to tolerate.

For many, investing is a crucial component of wealth-building, and it can be a lot fun, too. At the end of the day, though, you must remember that you’re putting real money in a real market, and your choices have real-world consequences.