1 00:00:00,000 --> 00:00:05,520 75% of the individual investors rely on social media when making investment decisions. 2 00:00:05,880 --> 00:00:09,520 And this is changing the playing field for our pension investments. 3 00:00:09,800 --> 00:00:10,800 I'll tell you what I've found. 4 00:00:13,760 --> 00:00:19,160 Hi, I'm Eric and Tracy and I run the Time to Retire channel where we talk about 5 00:00:19,160 --> 00:00:21,880 all things retirement and retirement invested. 6 00:00:22,280 --> 00:00:25,760 So please hit that subscribe button if that's the kind of thing you're interested in. 7 00:00:25,760 --> 00:00:31,520 And if you're already subscribed, then please hit the like button because it does really help us to grow the channel. 8 00:00:32,600 --> 00:00:37,880 So recently, there's been a notable increase in the number of individuals invested in the stock market. 9 00:00:38,160 --> 00:00:44,720 I say individuals or what we call retail investors, as opposed to institutional investors, 10 00:00:44,720 --> 00:00:50,440 you know, the companies that invest for themselves and with our company pension money, that kind of thing. 11 00:00:50,440 --> 00:00:57,680 And this trend can be attributed to several factors such as technology advancements, 12 00:00:57,680 --> 00:01:01,760 the COVID-19 pandemic and changes in regulations. 13 00:01:01,760 --> 00:01:06,200 And retail investors were previously considered a brithnish group, 14 00:01:06,200 --> 00:01:11,640 but they're now taking on a more prominent role in actually shaping the investment landscape. 15 00:01:12,320 --> 00:01:16,880 So in this video, I want to discuss the key trends in retail investing 16 00:01:16,880 --> 00:01:20,520 and how various factors are affecting their behavior. 17 00:01:21,600 --> 00:01:27,680 Let's start with the COVID-19 pandemic and the availability of commission free trading apps. 18 00:01:28,000 --> 00:01:34,640 So many people turn to stock markets invest in during this time to actually make use of any spur 19 00:01:34,640 --> 00:01:40,480 cash it saved from not going on holiday and to do something with a newly found free time. 20 00:01:41,360 --> 00:01:45,880 The stock market quickly recovered from its initial crash during the pandemic 21 00:01:45,880 --> 00:01:52,840 and it attracted a new wave of young and tech savvy investors who saw growth potential, 22 00:01:53,720 --> 00:01:55,880 particularly in tech sectors. 23 00:01:55,880 --> 00:02:02,280 According to Charles Schwab, up to 15% of retail investors may have made their first 24 00:02:02,280 --> 00:02:04,520 ever investments in 2020. 25 00:02:04,520 --> 00:02:08,760 And these investors are no longer just passive participants, 26 00:02:08,760 --> 00:02:15,000 but they're active stakeholders who can sometimes try and influence corporate decision making. 27 00:02:15,000 --> 00:02:18,440 Let's take the GameStop saga in early 2021. 28 00:02:19,720 --> 00:02:24,760 This was an example of how retail investors can really impact market dynamics 29 00:02:24,760 --> 00:02:28,680 while this might not present the typical investor behavior. 30 00:02:28,680 --> 00:02:34,280 My 20 year old son was heavily involved where I really took a backseat on it all. 31 00:02:35,480 --> 00:02:40,200 The rise of retail investing as part of changes in the market 32 00:02:40,200 --> 00:02:45,320 with individual investors demanding more transparency and accountability 33 00:02:45,320 --> 00:02:47,320 and improved corporate governance. 34 00:02:48,680 --> 00:02:52,920 This shift has been fueled by the increase in use of technology 35 00:02:52,920 --> 00:02:56,520 and actually the way we access information around companies. 36 00:02:57,240 --> 00:03:01,880 I see three things that are shaping the future of retail investing. 37 00:03:01,880 --> 00:03:06,760 Number one is the growing focus on ESG investing, 38 00:03:06,760 --> 00:03:10,760 that's environmental, social and governance investing. 39 00:03:10,760 --> 00:03:15,880 These criteria become really important considerations for retail investors. 40 00:03:15,880 --> 00:03:20,680 They're now actively seeking companies that actually align with their own values 41 00:03:20,680 --> 00:03:24,680 and prioritize sustainability and ethical practices. 42 00:03:24,680 --> 00:03:30,680 In fact, one in every 10 investors in the UK engage in ESG investing. 43 00:03:30,680 --> 00:03:35,640 This has led to a rise in the number of ESG funds 44 00:03:35,640 --> 00:03:43,720 with global asset managers expected to increase these funds to 33.9 trillion by 2026. 45 00:03:43,720 --> 00:03:50,440 Furthermore, institutional investors have reported 60% better returns for ESG investments, 46 00:03:50,440 --> 00:03:53,320 which indicates that the trend's going to continue to grow 47 00:03:53,320 --> 00:03:57,240 as more ESG funds will bound to enter the market. 48 00:03:57,240 --> 00:04:02,200 To adapt to this evolving landscape, financial institutions need to assess 49 00:04:02,200 --> 00:04:06,200 and transform their business models, their price and strategies, 50 00:04:06,200 --> 00:04:08,520 and also their customer experience. 51 00:04:08,520 --> 00:04:13,720 This is to cater for the needs and preferences, particularly of retail investors. 52 00:04:13,720 --> 00:04:17,960 Most importantly, they need to adopt the right technologies 53 00:04:17,960 --> 00:04:23,000 to ensure that they're maximizing that engagement, particularly around social media. 54 00:04:23,000 --> 00:04:28,440 But by embracing these trends and adapting to the needs of retail investors, 55 00:04:28,440 --> 00:04:33,240 financial institutions can stay ahead and build lasting relationships 56 00:04:33,240 --> 00:04:35,800 with this newly empowered segment. 57 00:04:35,800 --> 00:04:41,240 So the second point for me is the popularity of fractional share investing 58 00:04:41,240 --> 00:04:42,840 and how this has increased. 59 00:04:42,840 --> 00:04:47,640 This allows you to purchase a portion of a very highly priced stock, 60 00:04:47,640 --> 00:04:50,040 even with a limited amount of money. 61 00:04:50,040 --> 00:04:53,640 And this has made investing much more accessible and inclusive, 62 00:04:53,640 --> 00:04:59,320 allowing more people to actually diversify their portfolios with less risk really. 63 00:04:59,320 --> 00:05:04,760 So fractional share transactions actually now compromise about 50% 64 00:05:04,760 --> 00:05:10,120 of the whole market trading volume, and this is expected to continue rising. 65 00:05:10,120 --> 00:05:14,440 And this provides a much easier entry point for individual investors. 66 00:05:14,440 --> 00:05:17,480 So number three for me is cryptocurrency. 67 00:05:17,480 --> 00:05:21,960 So number three for me is cryptocurrencies and digital assets. 68 00:05:21,960 --> 00:05:25,800 And these have really caught the attention of retail investors 69 00:05:25,800 --> 00:05:28,520 because of the potential for high returns. 70 00:05:28,520 --> 00:05:32,440 And they also serve as an alternative to traditional investments. 71 00:05:32,440 --> 00:05:36,680 We've got platforms like Coinbase and Binance and Revolut, 72 00:05:36,680 --> 00:05:41,080 which have made it really easy for individuals to actually invest in this type of asset. 73 00:05:41,080 --> 00:05:47,400 And actually, it currently makes up 5% to 10% of their overall wealth. 74 00:05:48,280 --> 00:05:51,480 This market is expected to grow by 8% each year, 75 00:05:51,480 --> 00:05:55,080 primarily driven by us, the retail investors. 76 00:05:55,800 --> 00:05:59,240 And DIY investing in generally is actually on the rise, 77 00:05:59,240 --> 00:06:03,880 as individuals are accessed to a much wider range of online tools now. 78 00:06:04,600 --> 00:06:08,440 And they could actually quite easily invest in these fractional shares. 79 00:06:08,440 --> 00:06:12,920 But this hands-on approach allows them to customize their portfolio, 80 00:06:12,920 --> 00:06:16,120 as according to their own goals and their own risk tolerances. 81 00:06:16,120 --> 00:06:24,040 But in the UK, over 10 million B.I.Y. investment accounts were opened in Q1 or 2024 alone. 82 00:06:24,040 --> 00:06:29,880 And this indicates a real shift away from relying on paid financial advisory services. 83 00:06:31,480 --> 00:06:37,080 Also, thematic investing has really gained popularity among retail investors. 84 00:06:37,080 --> 00:06:42,200 You know, the focus on these longer-term trends, such as renewable energy, 85 00:06:42,200 --> 00:06:47,720 technology advancements, healthcare innovation, these theme DTFs, 86 00:06:47,720 --> 00:06:52,360 which you'll all have seen if you have your own SIPP and also the mutual funds, 87 00:06:52,360 --> 00:06:57,160 they're becoming really popular for capitalizing specifically on these themes. 88 00:06:57,160 --> 00:07:03,480 And in the US, the top four themes have accounted for 25% of the market returns. 89 00:07:03,480 --> 00:07:10,840 Since the pandemic began. And AI thematic themes also have gained 90 00:07:10,840 --> 00:07:14,120 real significant track the months of the retail investors as well. 91 00:07:15,000 --> 00:07:19,560 Individual investors have unique reasons and actions that distinguish them 92 00:07:19,560 --> 00:07:25,240 from institutional investors. They've actually drawn to stock market for a variety of purposes, 93 00:07:25,240 --> 00:07:31,640 such as generating a passive income through dividends or maybe safeguarding their funds 94 00:07:31,640 --> 00:07:37,720 against inflation. Also, support businesses that actually align with their own beliefs. 95 00:07:38,520 --> 00:07:43,000 Additionally, retail investors have actually the benefits they've been able to 96 00:07:43,000 --> 00:07:47,000 to wait for favorable market conditions before they invest. 97 00:07:47,000 --> 00:07:52,600 And this allows them to avoid times of high volatility or high uncertainty. 98 00:07:53,240 --> 00:07:57,880 And before I mentioned that this growing interest in retail investment in the 99 00:07:57,880 --> 00:08:02,920 retail investment in environmental, social and governance or what called ESG invested. 100 00:08:03,960 --> 00:08:10,840 Retail investors aim to invest in companies, as I said, that share their values, often 101 00:08:10,840 --> 00:08:18,440 prioritize sustainability and social responsibility. This has prompted individual investors 102 00:08:18,440 --> 00:08:23,400 to actually engage with company actually at board level on things like 103 00:08:23,400 --> 00:08:28,520 board diversity and sustainability. And as a result, the regulators have actually 104 00:08:28,520 --> 00:08:35,400 implemented laws that require organizations to provide much more transparency and disclosure 105 00:08:35,400 --> 00:08:44,680 about ESG related information. In fact, ESG disclosures can often boost activity as soon as it's released. 106 00:08:45,800 --> 00:08:49,640 Now, let's talk about social media platforms and online forums. 107 00:08:49,640 --> 00:08:54,840 These have really become much more influential tools for the retail investor. 108 00:08:54,840 --> 00:09:02,840 And according to a recent survey by IR Magazine, 75% of investors actually rely on social media 109 00:09:02,840 --> 00:09:08,200 when making investment decisions. So we've got community you'll heard of like Reddit, 110 00:09:08,200 --> 00:09:14,680 Wall Street, Betts, and they really demonstrated how this collective action can actually move 111 00:09:14,680 --> 00:09:22,280 markets at a grand scale. Individual investors are using these platforms to share insights 112 00:09:22,280 --> 00:09:28,600 and strategies as well as to coordinate investment decisions. And therefore, it's not really surprised 113 00:09:28,600 --> 00:09:35,160 that companies like Ford and CBS actually use social media platforms like X, I won't call 114 00:09:35,160 --> 00:09:41,880 formerly Twitter, I think that's gone now, for investor relations. Moreover, there's also a 115 00:09:41,880 --> 00:09:48,360 growing trend towards utilizing Robo advisors and automated trading platforms. And these new 116 00:09:48,360 --> 00:09:54,600 technologies provide retail investors with some quite advanced tools that previously were only 117 00:09:54,600 --> 00:10:01,400 available to actually the big institutional investors. By incorporating AI and machine learning, 118 00:10:01,400 --> 00:10:06,440 retail investors can now automate their investment strategies. And this results in 119 00:10:06,440 --> 00:10:13,880 sometimes cost reduction and improved efficiency. Also technology has facilitated real time comms 120 00:10:13,880 --> 00:10:21,560 and engagement between companies and the retail investments. So how does this change things for 121 00:10:21,560 --> 00:10:28,520 us? Well, when I consider investing now, I don't just look at the financial ratios, I actually 122 00:10:28,520 --> 00:10:35,960 take into consideration where the organization stands politically and socially as I know 123 00:10:35,960 --> 00:10:43,320 retail investors sentiment can actually move markets. So I hope you find this useful and 124 00:10:43,320 --> 00:10:48,520 insightful. And if you did, don't forget to give us a like. And I will see you on the next one. 125 00:10:48,520 --> 00:11:08,040 Thanks guys.