Financial Services & Insurance

Retail Investors Show Varied Interests in Investment Choices

01 Nov, 2023 | Statistics

Retail investors have become a significant force in the stock market in recent years, due to the development of technology, the impact of social media, and the increasing interest in sustainable investing. It is impossible to overstate how much this boom in retail investing has changed investment trends and market dynamics.

About 30 million new brokerage accounts were established in the US in 2020, marking the start of the retail investor wave. Retail investors made up 25% of all equity trading volume by 2021, nearly twice as much as was recorded ten years earlier. The trend of growth persisted until 2023, when a staggering $1.5 billion was poured into the market in a single week by retail investors, setting a new record for weekly inflows.

Changing investment trends

Because of new trends and cultural events, retail investors have started broadening their holdings across a range of asset classes. With 50% of respondents showing interest, dividend investing emerged as the most popular approach, according to Public's Retail Investing Report. With 36% of the preference, AI and whole stock market index investment were tied for second place. Concerns about the current climate problem were also raised, with 27% of respondents showing interest in electric vehicles (EVs) and 33% in renewable energy.

31% of those surveyed said they would consider investing in Treasury bills and big tech. 26% of investors were interested in large-cap stocks, small-cap stocks (24%), developing markets (23%), real estate (23%), gold and precious metals (23%), and, mid-cap (19%). Commodities and inflation protection, stocks fell behind, with 12%, and 13% interest respectively.

Moreover, In the US, 38% of retail investors are women while 62% of investors are men. With 67.1% of all investors, White people make up the majority. Hispanic or Latino investors make up 11.9%, while Black or African American investors make up 10%.

Retail investor behavior

Interestingly, when looking for investing ideas and information as of 2023, almost 60% of retail investors rely on broker/app instructional materials and traditional financial media. With 40% of retail investors utilizing social media for investment-related content, social media has emerged as the third most popular source. Forty percent of younger investors have expressed interest in sustainable investing.

According to data from Bloomberg, retail investors held 19.5% of all shares traded on the US stock market in the first half of 2020, a major increase from the previous year. Notably, individual investors have a significant influence on particular stocks and industries. In 2023, Tesla is the most popular stock among retail investors, with net retail flows of $9.75 billion. Furthermore, eight of the biggest tech firms in the world; Amazon, Apple, NVIDIA, Alphabet, and Microsoft—are included in the top ten lists of choices for retail investors.

The level of risk appetite among US retail investors varies. Almost one-third of participants reported in January 2023 that they were less inclined to take risks. In comparison, more than 30% of investors reported an increase in their risk appetite in July 2023, according to survey replies.

Moreover, 42% of US retail investors seek to invest for a week or less, while the majority (79%) have a rather short investment horizon. Nonetheless, 21% of retail investors keep their money in their holdings for a year or longer.

The fact that individual investors are becoming an important driver in the stock market serves as proof of how the investing world is changing. Retail investors are impacting market discussions about finance and sustainability as well as investment patterns.

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