The rise of the retail investors

The army of investors shaking up global financial markets, do not match the historical stereotype

5 min read
Individual investors who disregard conventional stock fundamentals have begun to dominate the public markets. It has been dubbed the "Robinhood Effect": the growth of retail investors taking up stock trading as a pastime. In addition, social media triggered a whole new army of investors beginning to realise their collective purchasing power.

Partially due to increased time spent online during the pandemic, on Reddit and Twitter, and partly due to the influx of cash in the form of government stimulus checks, the stock market has been irrevocably altered as more individuals realise they can significantly influence stock prices and trading volumes.

Customers created three million new accounts on Robinhood's platform in the first quarter of 2020 alone. In January 2021, about six million individuals in the United States downloaded trading apps, resulting in record-high average daily volumes for equities and options transactions at retail brokerages. Credit Suisse says that in 2021, individual investors were responsible for about a third of all stock market activity in the U.S.

Bloomberg Intelligence analyst estimated that individual investors accounted for 23% of all U.S. equity trading in 2021, double the amount in 2019 and equal to all hedge funds and mutual funds combined.

Retail investors collectively have significant purchasing power as highlighted above. While these small-time traders often trade for pleasure in their spare time, their cumulative purchasing power has the potential to alter prices and, in some circumstances, make or lose significant money.

Who are retail investors

Retail investors, often known as individual investors, have a growing impact on the market. They buy and sell debt, equities, and other investments via a broker, bank or mutual fund. They execute their trades via full-service, traditional brokerages, discount brokers, and web brokers. Individual investors invest for personal gain, not on behalf of a third party. Typically, retail investors are motivated by personal, life-event objectives, such as planning for retirement, paying for their children's education, purchasing a home, or financing another significant purchase.

Understanding retail investment

Bonds are notoriously difficult to trade on the majority of trading platforms. Hence the majority of retail investors invest in equities instead. In addition, retail investors utilise discount brokerages or apps like Robinhood (NASDAQ:HOOD) or invest via employer-sponsored 401(k)s or other retirement plans.

Recent technological and business model improvements in the brokerage industry have greatly simplified investing for regular investors. For example, through an app, in under 10 minutes, you can now execute a buy/sell transaction which was a procedure exclusive to the top 1% forty years ago or those with the time and energy to fill out interminable forms ten years ago.
With the click of a button, investors may purchase and sell stocks, options, and mutual funds. In addition, retail investors may use margins or loans to buy equities and other assets.

U.S. Securities and Exchange Commission governs the entire procedure (SEC). The SEC imposes stringent regulations for day trading, margin use, and investments in asset classes such as hedge funds and private equity. Additionally, the SEC regulates the filing procedure for public corporations selling investors’ equity.

Recognising the power of retail investors

Retail investors already strongly impact the market, and nothing indicates that this trend won't continue. Moreover, commission-free trading apps such as Robinhood have introduced a new generation of retail investors to the market, offering them access to a fantastic wealth-building opportunity.

With retail investors currently constituting the majority of the market and many more set to enter the pool soon, it is reasonable to predict that their influence will only increase. Now, the combined efforts of about half of American households are enough to alter stock prices.

The advantages of being a retail investor are numerous and well-documented. However, potential retail investors seeking further motivation to begin investing may choose to consider the following:

Smaller stock investment

One of the best things about the stock market is that anyone can buy shares in any publicly listed firm. In most circumstances, these stocks represent a minor part of ownership in a corporation. However, if a significant number of shares are acquired, one can acquire a controlling stake in the company.

Most employed individuals who invest in the stock market can't afford to spend six or seven figures. According to the SEC, day traders must have a minimum of $25,000 invested. Nevertheless, retail investors can invest smaller, more manageable sums of money in the stock market.

Retail traders typically earn their living outside of the financial markets, typically through employment or self-employment. Therefore, the failure of a single investment opportunity will not devastate their portfolio. Moreover, despite the smaller investments and capital required in retail investing, these investments can accumulate over time into a substantial retirement account. 


Unlike more structured funds, retail investors' portfolios are not bound to a specific course of action or asset class. Retail investors can swiftly liquidate their stock holdings or mutual fund shares, especially if they have a brokerage account. This is as simple as logging on to their investor dashboard and clicking 'sell'.

The long game

If you find a worthwhile investment, you may be able to disregard short-term market declines and remain invested for extended periods as an individual investor. Simply said, you may be able to afford the patience that institutional investors cannot.

Profit and cash flow

Undoubtedly, the stock market can be an excellent method for generating wealth for knowledgeable individuals. For the more significant part of a century, the average return on the stock market has been roughly 10% each year. Of course, returns will vary yearly, but investors who subscribe to benchmark indices can anticipate an annual return of approximately 10%.


As individuals invest their funds, retail investors are more likely to take a genuine interest in monitoring and nurturing their investments. Moreover, as they are expected to manage risk independently, retail investors can concentrate on the best-performing equities in their portfolios.


Most individuals fall into the retail investor category, and every employed individual should view this as an opportunity. However, due to current high inflation levels, money held in a non-interest-bearing bank account could be costly, as the purchasing power reduces slowly over time. In contrast, retail investors can build a portfolio of investments based on their risk appetite.

Although investing may appear intimidating, numerous resources are available to assist individuals on their investment path. People should seek opportunities to learn more about investing, establish short- and long-term objectives, consider risk tolerance, and choose a trading platform that makes investment accessible.

Companies, policymakers, and the ecosystem as a whole will continue to adapt to the increasing demands of today's retail investors, which is a positive thing for people and the world as a whole.
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