Why some young Canadians are investing their CERB money

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Some younger Canadians have used portions of their Canadian Emergency Response Benefit to jump into the hot stock market and learn to invest, but they’ve discovered it’s not easy to make a big buck fast.

Known online as the “stimmy,” federal stimulus cheques have been a financial lifeline for many to pay for daily living expenses. While there is no data showing exactly how people used their CERB, some young people have invested it over the past year.

In 2020, Canadians opened more than 2.3 million new do-it-yourself investor accounts between January and December, according to a press release from the Investment Industry Regulatory Organization of Canada.

CERB, which originally dispensed up to $2,000 a month, has been modified into an employment-insurance program since last September. As the pandemic pushes past a year, young people have had to seek out ways to financially support themselves beyond it, with some turning to investing online.

Jake Friedrich, 26, is one of those people. Before COVID-19, Mr. Friedrich worked at a hockey club in Vancouver. When the pandemic hit, he lost his job and was forced to return home to Edmonton in April to live with his mother and brother. There, he applied for CERB.

His brother suggested using some of the money to invest. In May, using his brother’s referral link (which gave them both a $5 bonus), he opened a Wealthsimple account and invested the money he had leftover from paying off bills and moving expenses – about $50.

“The idea I ran with was, if I can turn this money into extra money, so I can get by a little further with it, then it’s worth a shot,” he said.

His original investment has gone up and down “a couple hundred dollars,” but he doesn’t expect to see any real gains at this point. “It’s not trading, it’s more of a gamble.”

Mehdi Batata, a 21-year-old student from Montreal, had a similar experience. Mr. Batata had a job at his university before the pandemic but lost it when the campus shut down. Knowing it would be a long time before the school reopened, he applied for CERB.

“I thought to myself, if I’m about to be unemployed for quite a while, let’s invest it and hope to make a little bit of cash right now.”

Mr. Batata said even though he had expenses and bills to pay, his modest student lifestyle allowed him to have some extra money. “I feel like if I did not invest it, I would have simply lost an opportunity.”

Some of his investments were made through a robo-adviser, but he chose a few himself, including airline and travel stocks such as Air Canada and Delta Air Lines, as they were trading low because of the pandemic and had upside potential.

“It wasn’t profitable for a long, long time,” he said. Though he was initially worried about the risk of investing, Mr. Batata said making an eventual return was worth it.

University of Toronto finance professor Lisa Kramer said “FOMO,” or fear of missing out, is driving many people to invest. First-time investors might aim to replicate something they saw online – such as the recent GameStop phenomenon, in which the gaming company’s stock soared based on online posts. But they don’t necessarily understand the basics of risks and return, or realize that the market’s stellar gains recently aren’t sustainable in the long term, she said.

She recommended investors take a step back and reallocate their holdings into a more diversified portfolio.

Another driving factor is an increase of free time. “What we’re seeing is a little bit reminiscent of the tech bubble of the late 1990s, where, similarly, the market was going up by leaps and bounds. Some people were quitting their jobs to become day traders,” Prof. Kramer said.

“These days, people don’t even have to quit their jobs, because they’re already unemployed.”

The investing pull seems to be affecting more men than women. Financial services market research firm Dalbar Inc. conducted a poll of 1,116 North Americans in February and found that 34 per cent of male respondents had opened a new online brokerage account in the past 12 months, while just 16 per cent of female respondents had done the same.

And according to Wealthsimple, 84 per cent of their clients who traded in GameStop stock were men. (Sixty-three per cent were millennial, 29 per cent Gen Z.)

“The reality is that a lot of females are still bearing the brunt of the household responsibilities [and] looking after the kids. So how much time do they actually have to monitor the market?” said Anita Lo, vice-president of Canadian practice at Dalbar.

Will Berecz, an 18-year-old student, recently finished a personal finance class at his Windsor, Ont., high school. Previously a YMCA lifeguard, Mr. Berecz went out of work when the pandemic hit, and applied for CERB in May. His original game plan was to put the money toward paying for university.

After completing his personal finance class, however, Mr. Berecz changed directions. “Once I had a greater understanding of what to do with my money to see greater returns, I decided that investing would be the smarter option.”

Mr. Berecz did some research, opened an account through TD Direct Investing , and has holdings in stocks such as automaker Stellantis, as well as a TD mutual fund and a Bank of Montreal emerging markets fund.

“Unfortunately, so far it hasn’t paid off,” he said. He said he’s “playing the long game right now,” but added investing has still been an eye-opening learning experience.