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The Year Of The Retail Investor Keeps Getting Bigger

The Year Of The Retail Investor Keeps Getting Bigger

Retail investors will have their say on the stock market this year, and the recent GameStop and AMC Entertainment stock squeezes were only the beginning.

According to JPMorgan’s global markets strategist, Nikolaos Panigirtzoglou, retail investors have invested nearly $500 billion into equity funds this year, as cited by Business Insider.

At the current pace, small retail investors could end up pumping an unfathomable $1 trillion into stocks by the end of this year.

Retail investing spiked during the pandemic as investors had more time and money to spend on online trading. But it wasn’t just a pandemic pastime. They’ve gotten a taste, learned something more along the way, and now they want more. 

According to a Charles Schwab survey, 15% of current retail investors actually began investing in 2020. Quite a few Americans opened their first online trading accounts during the pandemic, using part of their stimulus checks to trade stocks.

More time at home due to quarantine and what is shaping up to be a much larger remote work trend, has further boosted retail investor interest in the stock market--and that doesn’t preclude people who entered the market with zero knowledge about investing.  

All major online stock trading platforms have seen a surge in demand during last year. Many of the new users are young or even first-time investors. Over half of them are aged 34 or younger.

Online brokers saw new accounts grow as much as 170% in the first quarter, with every following quarter gaining more momentum

In total, more than 10 million new brokerage accounts were opened by individuals in 2020. Just in the first three month of this 2021, 9 million new retail clients jumped into the market.

Strengthened by the epic short squeeze in GameStop and few other stocks, this has been--and will continue to be--a banner year for retail investors whose unexpected power to drive and impact markets has now been felt far and wide. 

In late January, small retail investors joined forces to push GameStop stock to amazing new heights, going from under $20 to a high of $483. The collective group of Reddit users from the WallStreetBets subreddit bought the stock as hedge funds were attempting to short it.

Goldman Sachs noted that a few months after the GameStop saga, retail investors slowed down, but picked up the investing pace again in May when retail investors increased investment into so-called meme-stocks.

“Retail traders will likely continue to favor stock markets, thanks to "anemic" money markets and credit yields. Plus, a continued increase in inflation would make equities more favorable than bonds or cash,” Goldman Sachs said. 

Currently, the US households are allocating 44% of their assets to equities, according to the Goldman Sachs new report. That nearly matches the all-time high allocation from two decades ago, just before the dot-com bubble burst.

According to the new Federal Reserve data, thanks largely to a surge in the stock market, the US Household net worth rose to $136.9 trillion in the first quarter, a 3.8% gain from the end of 2020. Of that total, $3.2 trillion came from equity holdings.

By Michael Kern for Safehaven.com 

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