With the rise of financial technology and mobile internet, retail investing has undergone profound changes in recent years. Individual investors now have easier access to the capital market by embracing digital brokerage platforms and leveraging social media for investment ideas. At the same time, alternative assets like cryptocurrencies and NFTs are gaining more attention among retail investors looking to diversify their portfolios. This article summarizes several key trends that are shaping retail investing landscape.
Retail investors prefer low-cost digital brokerages over traditional institutions
The convenience brought by mobile apps and commission-free trades offered by digital brokerages like Robinhood have fundamentally changed how individual investors participate in the market. Compared with traditional brokerages, these fintech platforms provide easy account opening, intuitive interfaces, fractional share investing, as well as social community features. By lowering the barrier of market access, they have attracted a new generation of investors who are tech-savvy and willing to manage their own money. According to estimates, retail trading volumes at digital brokerages now account for around 40% of the total market, a dramatic rise within just a few years. This trend is expected to continue as technology progresses.
Retail investors allocate more capital to alternative investment assets
Apart from stocks and bonds, alternative assets like cryptocurrencies, real estate, private equity, and collectibles are gaining more attention from retail investors. The hype surrounding crypto and NFTs has prompted many individual investors to venture into this space for its astronomical return potential, despite higher risks. At the same time, platforms are rolling out fractional ownership in assets like real estate, artworks, and rare whiskey that were previously only accessible to institutional investors. This allows individual investors to easily incorporate alternative assets into their existing portfolios for improved diversification. As technology unlocks more alternative investments to retail investors, this asset allocation trend will likely accelerate.
Retail investors leverage social platforms and analytics for decisions
Social media platforms and retail trading forums like Reddit’s WallStreetBets have demonstrated their potential influence over market movements and individual stocks. Retail investors are increasingly leveraging insights from social platforms and online communities to gather investment ideas or sentiments before making trading decisions. At the same time, they are embracing analytics tools offered by brokerages to conduct investment research on their own. With an abundance of information and opinions online, retail investors now rely less on Wall Street analysts and traditional media, but more on peer opinions and self-directed research fueled by technology and data analytics. This shift towards social- and quant-based investing will push brokerages to keep enhancing their analytics offerings to drive engagement.
Retail investors demand enhanced education and two-way communications
While alternative assets and new technologies have created more investing options for individual investors, they also bring higher risks without proper financial education. According to surveys, retail investors, especially millennials and Gen Zs, wish to have more educational materials and two-communication channels with their brokerages or advisors. Brokerages that provide intuitive education content, virtual seminars with experts and responsive client support around the clock can better engage individual investors in the long run. Integrating technologies like AI chatbot and video streaming into client engagement practices will be crucial.
In summary, the retail investing industry is undergoing profound changes driven by technology advancement. Retail investors now expect lower barrier to entry, access to more products, social- and quant-based investing resources, as well as responsive education and communications. Brokerages and investment platforms need to embrace these trends to provide better investing experience.