75% of the individual investors rely on social media when making investment decisions.
And this is changing the playing field for our pension investments.
I'll tell you what I've found.
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So recently, there's been a notable increase in the number of individuals invested in the stock market.
I say individuals or what we call retail investors, as opposed to institutional investors,
you know, the companies that invest for themselves and with our company pension money, that kind of thing.
And this trend can be attributed to several factors such as technology advancements,
the COVID-19 pandemic and changes in regulations.
And retail investors were previously considered a brithnish group,
but they're now taking on a more prominent role in actually shaping the investment landscape.
So in this video, I want to discuss the key trends in retail investing
and how various factors are affecting their behavior.
Let's start with the COVID-19 pandemic and the availability of commission free trading apps.
So many people turn to stock markets invest in during this time to actually make use of any spur
cash it saved from not going on holiday and to do something with a newly found free time.
The stock market quickly recovered from its initial crash during the pandemic
and it attracted a new wave of young and tech savvy investors who saw growth potential,
particularly in tech sectors.
According to Charles Schwab, up to 15% of retail investors may have made their first
ever investments in 2020.
And these investors are no longer just passive participants,
but they're active stakeholders who can sometimes try and influence corporate decision making.
Let's take the GameStop saga in early 2021.
This was an example of how retail investors can really impact market dynamics
while this might not present the typical investor behavior.
My 20 year old son was heavily involved where I really took a backseat on it all.
The rise of retail investing as part of changes in the market
with individual investors demanding more transparency and accountability
and improved corporate governance.
This shift has been fueled by the increase in use of technology
and actually the way we access information around companies.
I see three things that are shaping the future of retail investing.
Number one is the growing focus on ESG investing,
that's environmental, social and governance investing.
These criteria become really important considerations for retail investors.
They're now actively seeking companies that actually align with their own values
and prioritize sustainability and ethical practices.
In fact, one in every 10 investors in the UK engage in ESG investing.
This has led to a rise in the number of ESG funds
with global asset managers expected to increase these funds to 33.9 trillion by 2026.
Furthermore, institutional investors have reported 60% better returns for ESG investments,
which indicates that the trend's going to continue to grow
as more ESG funds will bound to enter the market.
To adapt to this evolving landscape, financial institutions need to assess
and transform their business models, their price and strategies,
and also their customer experience.
This is to cater for the needs and preferences, particularly of retail investors.
Most importantly, they need to adopt the right technologies
to ensure that they're maximizing that engagement, particularly around social media.
But by embracing these trends and adapting to the needs of retail investors,
financial institutions can stay ahead and build lasting relationships
with this newly empowered segment.
So the second point for me is the popularity of fractional share investing
and how this has increased.
This allows you to purchase a portion of a very highly priced stock,
even with a limited amount of money.
And this has made investing much more accessible and inclusive,
allowing more people to actually diversify their portfolios with less risk really.
So fractional share transactions actually now compromise about 50%
of the whole market trading volume, and this is expected to continue rising.
And this provides a much easier entry point for individual investors.
So number three for me is cryptocurrency.
So number three for me is cryptocurrencies and digital assets.
And these have really caught the attention of retail investors
because of the potential for high returns.
And they also serve as an alternative to traditional investments.
We've got platforms like Coinbase and Binance and Revolut,
which have made it really easy for individuals to actually invest in this type of asset.
And actually, it currently makes up 5% to 10% of their overall wealth.
This market is expected to grow by 8% each year,
primarily driven by us, the retail investors.
And DIY investing in generally is actually on the rise,
as individuals are accessed to a much wider range of online tools now.
And they could actually quite easily invest in these fractional shares.
But this hands-on approach allows them to customize their portfolio,
as according to their own goals and their own risk tolerances.
But in the UK, over 10 million B.I.Y. investment accounts were opened in Q1 or 2024 alone.
And this indicates a real shift away from relying on paid financial advisory services.
Also, thematic investing has really gained popularity among retail investors.
You know, the focus on these longer-term trends, such as renewable energy,
technology advancements, healthcare innovation, these theme DTFs,
which you'll all have seen if you have your own SIPP and also the mutual funds,
they're becoming really popular for capitalizing specifically on these themes.
And in the US, the top four themes have accounted for 25% of the market returns.
Since the pandemic began. And AI thematic themes also have gained
real significant track the months of the retail investors as well.
Individual investors have unique reasons and actions that distinguish them
from institutional investors. They've actually drawn to stock market for a variety of purposes,
such as generating a passive income through dividends or maybe safeguarding their funds
against inflation. Also, support businesses that actually align with their own beliefs.
Additionally, retail investors have actually the benefits they've been able to
to wait for favorable market conditions before they invest.
And this allows them to avoid times of high volatility or high uncertainty.
And before I mentioned that this growing interest in retail investment in the
retail investment in environmental, social and governance or what called ESG invested.
Retail investors aim to invest in companies, as I said, that share their values, often
prioritize sustainability and social responsibility. This has prompted individual investors
to actually engage with company actually at board level on things like
board diversity and sustainability. And as a result, the regulators have actually
implemented laws that require organizations to provide much more transparency and disclosure
about ESG related information. In fact, ESG disclosures can often boost activity as soon as it's released.
Now, let's talk about social media platforms and online forums.
These have really become much more influential tools for the retail investor.
And according to a recent survey by IR Magazine, 75% of investors actually rely on social media
when making investment decisions. So we've got community you'll heard of like Reddit,
Wall Street, Betts, and they really demonstrated how this collective action can actually move
markets at a grand scale. Individual investors are using these platforms to share insights
and strategies as well as to coordinate investment decisions. And therefore, it's not really surprised
that companies like Ford and CBS actually use social media platforms like X, I won't call
formerly Twitter, I think that's gone now, for investor relations. Moreover, there's also a
growing trend towards utilizing Robo advisors and automated trading platforms. And these new
technologies provide retail investors with some quite advanced tools that previously were only
available to actually the big institutional investors. By incorporating AI and machine learning,
retail investors can now automate their investment strategies. And this results in
sometimes cost reduction and improved efficiency. Also technology has facilitated real time comms
and engagement between companies and the retail investments. So how does this change things for
us? Well, when I consider investing now, I don't just look at the financial ratios, I actually
take into consideration where the organization stands politically and socially as I know
retail investors sentiment can actually move markets. So I hope you find this useful and
insightful. And if you did, don't forget to give us a like. And I will see you on the next one.
Thanks guys.