The average Brit plans to invest almost 20% more each month after the pandemic, extending the retail trading boom, survey finds

Above angle view of a young man using a trading app.
In addition to executing orders, brokers also provide a range of educational resources and investing advice.

  • The average Brit plans to spend 19% more each month on investing post-pandemic, a Barclays Smart Investor survey says.
  • Half of those surveyed said they will cut back on other spending to fuel their lockdown investing habits.
  • On Monday, trading app Robinhood said it had recorded lower trading levels between March and June.
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The average UK investor plans to increase their investments by 19% each month as COVID-19 restrictions in the country come to an end, extending the retail trading boom that originated during the pandemic, a Barclays Smart Investor survey found.

Younger people are set to increase their investments by an even higher number. The survey, released on Wednesday, found Gen Z investors, many of whom got hooked on investing through the rise of ‘finfluencers’ and financial social media content during the pandemic, are planning to spend an additional 36% a month on investments post-pandemic.

Across all age groups, only 6% of the roughly 2,000 people surveyed, said they planned to cut how much they invest each month. They cited the return of “normality” and the increased spending on activities such as holidays, meals out and weekend trips.

In contrast, around 50% said they would spend less on such activities to support their investing habits.

“The prediction that many will continue, or increase, the amount they invest going forward is likely driven by a rise in lockdown savings, with the ONS reporting that UK household savings are nearing an all-time high.” Clare Francis, director of Barclays Smart Investor said.

76% of those surveyed said they would maintain their investing routine and as few as 4% of those who began investing during the pandemic said they would stop once restrictions in the UK were lifted.

“Today’s findings show just how much the pandemic has changed our approach to saving and investing. As new investors flocked to the stock market last year, it was easy to assume that it was just a lockdown hobby, and that many would go back to their old spending habits when the world re-opened.” Francis said.

Retail trading apps and platforms like Robinhood and eToro, which allow individuals to invest in stocks and digital assets like crypto currencies via their phones or laptops, saw a surge in popularity throughout the pandemic.

Robinhood, which makes its stock-market debut this week, however noted a slowdown of activity on its platform in the second quarter of this year, which was when lockdown restrictions in many countries eased. In its updated prospectus published on Monday, the company said it expected revenue to drop in the three months to September 30 because of the decline in trading activity.

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A ‘finfluencer’ with millions of followers on social media says Robinhood and other trading apps might do more harm than good to young investors

Tori Dunlap
  • Retail trading apps could cause issues for young investors according to money expert Tori Dunlap.
  • She thinks the apps do not educate their users enough and are not inclusive to minority groups.
  • Robinhood was recently forced to pay $70 million after FINRA accused the app of causing harm to customers.
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Young investors, and Gen-Zers in particular, are pouring their spare cash into things like cryptocurrencies and meme stocks, drawn in by the social media communities that have banded together to take on Wall Street giants, and popularized by retail trading apps like Robinhood.

As positive as it is to see young people get involved with their own finances, these apps might be doing more harm than good, seeing as they don’t educate their users enough and aren’t particularly inclusive places, according to ‘finfluencer’ and personal finance expert Tori Dunlap.

Dunlap, who has millions of followers on Instagram, TikTok and Twitter and runs personal finance education and advice brand ‘Her First $100K’, says the problem with these apps is they are appeal to new, young investors that are often unaware of risks, or what a good investing strategy is due to a lack of education on the subject.

“They’re focusing on young people, which is great, but young people who don’t really know what they’re doing. They don’t really know how to invest, don’t really know how to grow their wealth and so I think that that’s a huge risk.” she told Insider in an interview. “Going after this certain population is great, but what are you doing to educate them? What are you doing to make they understand a risk before, you know, the risks involved before they start investing?” she said.

Dunlap knows a thing or two about looking after her finances. She started her first business age 9 and by the time she was 25, she’d built up savings worth $100,000.

Retail trading has soared in popularity over the past 18 months throughout the COVID-19 pandemic, with apps like Robinhood or platforms like eToro seeing booming business. But they’re not without pitfalls.

Just last month Robinhood agreed to pay nearly $70 million to US regulators to settle claims it had misled millions of customers, approved ineligible traders for risky strategies, and didn’t supervise technology that locked millions out of trading. This was the largest fine on record to the Financial Industry Regulatory Authority.

Alongside this, retail trading apps and social media influencers who talk about finance have pushed the idea of democratizing trading, meaning that anyone can do it and they don’t necessarily need financial professionals to help them make money from investing.

Robinhood was not available for comment when contacted by Insider.

Dunlap said apps like Robinhood have done well at making investing more interesting and appealing to young people , which she thinks is key in terms of them starting in growing their wealth early in life, but she also believes they still have a long way to go.

Trading apps often “gamify” activity, rewarding users with little bursts of digital confetti on their screens when they make a trade, or playing little jingles to notify them of updates. There have been well-documented cases of users that have suffered the equivalent of gambling additions as a result, for example.

Another one of her qualms is that the community the trading apps create aren’t especially inclusive. The lack of educational tools is one issue, but Dunlap said she thinks it reaches all the way to these apps are designed, which she describes as ‘bro-y’.

“It’s not really a democratization if it doesn’t involve minority groups, if it doesn’t also involve women, and people of color and other members of other minority groups,” Dunlap said. “Yes, it’s, like, appealing to younger people, but it’s not straight white male hedge fund managers, it’s just straight white male ‘finance bros.'”

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Retail investors are on track to plow $400 billion into stocks in 2021 with the day-trading boom still in its early innings, Goldman Sachs says

Reddit Wall Street Bets Retail Trading GameStop
  • Retail traders are set to pour a net $400 billion into the equity market this year, Goldman Sachs said.
  • That’s a hike from the analysts’ previous estimate of $350 billion.
  • Goldman’s basket of retail favorites has outperformed the S&P 500 by 3 percentage points.
  • See more stories on Insider’s business page.

Retail traders responsible for driving record rallies in meme stocks like GameStop and AMC Entertainment are on track to pour a net $400 billion into equities this year, Goldman Sachs analysts said.

In the Friday note, the analysts, led by David Kostin, raised their estimate for full-year household net equity buying forecast to $400 billion from $350 billion in light of “high cash balances and continued retail participation.”

Last year, households poured $367 billion into equities, while in 2018 and 2019, they were net negative on the asset class, the Goldman Sachs data showed.

“The retail bid is back,” the analysts wrote, noting that in the first quarter alone, households were the largest source of equity purchases, netting $172 billion.

The “renewed strength in retail activity” has pushed Goldman’s basket of “retail favorites” to top the S&P 500’s performance by 3 percentage points this month. Meanwhile, stocks with active retail trading activity have also outperformed the broad market.

Retail traders came into the spotlight earlier this year when they caused a massive rally in shares of video-game retailer GameStop. The rally spread to other stocks, too, including BlackBerry and AMC Entertainment. Since then, the term “meme stocks” has entered Wall Street’s vocabulary, as retail traders, mobilized on social media sites like Reddit and Twitter, continue to rally behind various companies.

In May, retail traders renewed their interest in the new class of stocks as they drove up shares of movie-theater chain AMC Entertainment. Other meme-stock classics also rallied, as retail traders added new stocks to the basket as well.

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

Currently, households allocate 44% of their assets to equities, the analysts said. That nearly matches the 46% all-time high allocation from 2000, just before the dot-com bubble burst.

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Retail investors are on pace to sink a record $1 trillion into stocks this year – and the flows have actually accelerated over the past month, JPMorgan says

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  • Retail investors have poured nearly $500 billion into equity funds this year, JPMorgan said.
  • At the current pace, they could be on track to sink a record $1 trillion into stocks in 2021.
  • The bank also noted that retail trading has again accelerated since mid-May after cooling off following the GameStop trading saga in January.
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Retail investors could be on pace to pour a record $1 trillion into stocks in 2021, JPMorgan said.

Year-to-date, retail investors have poured approximately $485 billion into equity funds, while the retail impulse into individual stocks and options has been re-accelerating since mid-May, said a team led by global markets strategist Nikolaos Panigirtzoglou in a recent note.

A metric that measures retail buying in bullish call options rose to a record high in January at the peak of the GameStop trading frenzy. As the market cooled off, the metric subsided between February and April. Now, it has picked back up and currently sits at its highest level since January.

The record inflows come as retail investing is ultra-popular and social-media interest in “meme stocks” like AMC and BlackBerry elevates stock prices to levels that are seemingly unconnected to fundamentals.

At the end of 2020, JPMorgan estimated that retail investors would put $500 billion into stocks in all of 2021. But if the current pace of buying continues, that number could jump to $1 trillion, Panigirtzoglou said.

Read more: 2 hedge fund veterans say ‘we know how this movie ends’ as investors pile into meme stocks. They unpack their strategy for finding market outliers – which ‘made a killing’ in 2020’s volatility

Other metrics that JPMorgan uses to gauge retail investing flows also show that the state of the retail trader is stronger than ever. For example, a basket of stocks popular with US retail-trading platforms have rebounded since mid-May and have outperformed the S&P 500 since March 2020. (JPMorgan did not disclose the individual stocks in the basket.

Also, the performance of a portfolio with 50% allocated to the Nasdaq and 50% to the Russell 2000 has outperformed the S&P 500 and rallied since mid-May. JPMorgan said this 50/50 split between tech stocks and small caps reflects the barbell trade that retail investors tend to favor.

However, it remains to be seen if the pace of retail investing will continue throughout 2021, and what areas of the stock market it will be concentrated in.

Vanda Research doesn’t see meme-stock momentum continuing for much longer.

“Squeezing highly shorted stocks is quickly falling out of fashion,” senior strategist Ben Onatibia and analyst Giacomo Pierantoniwhich said earlier this week.

jpmorgn chart

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Meme-stock momentum has withered after retail traders drove a 3-week rally in AMC, BlackBerry, and other Reddit favorites

AMC stock
Igor Golovniov/SOPA Images/LightRocket via Getty Images

  • Meme stocks are losing steam after a three-week rally that mirrored the frenzy of activity seen earlier this year.
  • Some of the most popular stocks have dropped 17% in the past week, Vanda Research said.
  • “Retail investors will rush to the exit unless there’s an immediate rally,” the analysts said.
  • See more stories on Insider’s business page.

Meme-stock momentum is fading after a three-week rally that mirrored the GameStop frenzy earlier this year.

The latest meme-stock bubble has lasted for three weeks, said Vanda Research senior strategist Ben Onatibia and analyst Giacomo Pierantoniwhich, which is about the same timeframe as earlier this year when an army of Reddit day traders poured into GameStop to push a short squeeze and drove other favorites higher as well.

Now, momentum for the basket of companies is “deteriorating,” as a basket of the most popular stocks has fallen 17% in the past week, the analysts said. On top of that, open interest for meme-stock call options has dropped in the past couple days as traders cash in before the expiration. And that’s likely to continue.

“Given the amount of risk embedded in these investments, we think retail investors will rush to the exit unless there’s an immediate rally,” the analysts said in the Wednesday note.

Vanda Research Meme Stock pullback
Source: Bloomberg, VandaTrack

AMC Entertainment led the latest round of meme-stock madness. After the company’s once-largest shareholder dumped almost all of its remaining shares, retail traders poured into the stock for weeks, driving it to all-time highs. Shares of the movie-theater chain are now trading around $60.

Other retail-trader favorites, like BlackBerry, GameStop, Clover Health, and Nokia, followed AMC’s footsteps amid the rally. Meanwhile, new names like Beyond Meat, Wendy’s, WorkHorse, ContextLogic, and Clean Energy Fuels, also joined the basket.

The trend of meme stocks began earlier this year with retail traders wanting to squeeze short-sellers on nostalgic stocks like GameStop and AMC Entertainment. But now, Vanda said, “squeezing highly shorted stocks is quickly falling out of fashion.”

The fizzling out of the meme-stock craze has coincided with a rally in cryptocurrencies. Matt Maley, chief market strategist for Miller Tabak + Co., told Insider previously that meme stocks in the past have taken off when cryptocurrencies have corrected, and vice versa. He said as the Federal Reserve considers pulling back on quantitative easing, there will be less liquidity in the markets.

Meme stocks and other “high-flying liquidity-fueled assets are going to have a tougher time rallying to the same degree that they once did,” he said.

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The SEC is reviewing changes to share trading after an explosion of interest in meme stocks, including the use of payment for order flow

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SEC Chairman Gary Gensler.

The Securities and Exchange Commission is looking at changing rules around share trading after the day-trader frenzy around meme stocks showed equity markets may not be as efficient as they could.

Chairman Gary Gensler said Wednesday he has asked the regulator’s staff to submit recommendations on a range of market rules, including the high fees paid to Wall Street brokers for executing small-investor orders and the rise of commission-free brokerage apps.

Their recommendations will address the issue of payment for order flow, or the compensation online brokers receive when stock orders are routed to third-party firms like Virtu Financial and Citadel Securities in order to carry out the trade.

Shares in Virtu fell 7.7% after Gensler’s comments. The high-speed trader handles about one-third of individual investors’ order flow in US stocks, according to the Wall Street Journal. Virtu’s stock rallied this year alongside the meme-stock frenzy, while Citadel Securities isn’t publicly traded.

Gensler previously called out popular investing apps like Robinhood that have introduced millions of amateur investors to stocks through the lure of zero commissions. He criticized the company for encouraging the gamification of the stock market, and for not doing enough to educate its user base of the risks associated with investing.

Robinhood’s business model, which operates on a system of payment for order flow, allows it to offer so-called “commission-free trading.” But some lawmakers have called for increased examination into the potential conflict of interest it presents its users.

The SEC will look into this practice, that uses phone alerts and other notifications to get investors to trade more, Gensler said at a Piper Sandler conference in New York.

“The question is whether our equity markets are as efficient as they could be, in light of the technological changes and recent developments,” he said.

Most of these issues came to regulatory attention after day traders used social platforms like Reddit to bid up prices of heavily-shorted stocks like GameStop, fuelling an over 1,200% surge in the video-game retailer’s stock in January.

More recently, a string of so-called meme stocks including AMC, Bed Bath & Beyond, and BlackBerry saw $1.27 billion in retail investor inflows in the past two weeks. That matches the peak of GameStop’s short squeeze earlier in the year.

New SEC rules could impact the business models that online brokerages use, meaning Robinhood and its competitors would have to operate under new guidelines.

“Brokers profit when investors trade,” Gensler said. “For those brokers who have these arrangements – and not all do – higher trading volume generates more payment-for-order flow. What makes the current zero-commission brokerage environment different is that investors do not see their costs as they’re executing trades, so they may perceive them as free.”

Read More: An award-winning software analyst of nearly 20 years breaks down why these 4 beaten-down stocks are set to soar in the months ahead – including 1 with 163% upside

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A rotation into cannabis stocks by retail investors has a lot more room to run as the latest meme-stock rally fades, research firm says

Tilray cannabis marijuana
A worker smiles as she shows cannabis plants at the Tilray factory.

  • Cannabis stocks may be the next area of attention for retail investors as a recent rally in meme stocks fizzles, says Vanda Research.
  • Inflows for Tilray and Sundial Growers have picked up this week.
  • “Retail purchases of meme stocks probably peaked on Wednesday,” said Vanda.
  • See more stories on Insider’s business page.

The meme-stocks rally that’s propelled AMC Entertainment up more than 2,200% so far this year is showing signs of exhaustion, but a recent pickup in buying of cannabis stocks including Tilray suggests that space could be the next center of attention for retail investors, according to a research firm.

“Retail purchases of meme stocks probably peaked on Wednesday,” said Vanda Research on Friday, noting a slowdown in net inflows into shares of AMC, the top recipient of retail investment money in recent weeks. Its rally has carried through to GameStop, BlackBerry and other stocks favored by retail investors active on social media such as Reddit’s Wall Street Bets platform. Vanda monitors retail trading activity in more than 9,000 US stocks and ETFs.

Meanwhile, inflows of $28.6 million into shares of cannabis companies Tilray and Sundial Growers on Thursday were the strongest since earlier rallies in the first quarter of the year. That marked the first clear signs of a rotation out of meme stocks, said Vanda. There was also a significant pick-up in retail flow on Friday for Tilray, Sundial and Cronos, three of the largest cannabis stocks traded in the US.

Meme stocks bounced back into the spotlight for retail investors in late May as bitcoin and other cryptocurrencies were crashing. AMC shares began to surge after major shareholder Dalian Wanda Group sold almost all of its remaining stake in the company. Redditors cheered the newly available shares and flexed their newfound weight in the market.

While meme stocks are still heftier in value than weeks before, the rally was starting to fizzle with AMC shares pulling back. AMC on Wednesday had $66 million in new inflows, less than half of the $136 million mln it had averaged in the previous two sessions, said Vanda. BlackBerry picked up some of the slack by drawing in $110 million for its largest day of retail buying in 2021.

However, “as opposed to BlackBerry, we think the rotation into cannabis stocks has a lot more room to run,” said Vanda, adding that Sundial and Tilray were the fourth and seventh-most active tickers on WallStreetBets forums on Thursday.

Tilray and Sundial jumped during the week after Amazon said its public policy team will back the Marijuana Opportunity Reinvestment and Expungement Act of 2021. The MORE act would, among other actions, end criminal penalties for anyone who sells cannabis in states where it’s legal.

“Despite the low chances that the Act is passed in the Senate (due to the filibuster), increasing media coverage is likely to attract the attention of the average retail investor,” said Ben Onatibia, a senior strategist at Vanda.

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Ask an analyst – our columnist answers your questions about how novice traders can thrive in financial markets

Stock Market Bubble
A trader blows bubble gum during the opening bell at the New York Stock Exchange (NYSE) on August 1, 2019, in New York City.

  • Insider’s new “Ask An Analyst” column offers novice investors advice on how to succeed with stocks.
  • Ryan Paisey is a veteran with nearly 20 years’ experience on the markets.
  • Find out below how you can submit him questions.
  • See more stories on Insider’s business page.

Retail investors – everyday people who buy stocks – are more important than ever in trading.

In January, Redditors saved bricks-and-mortar video game chain GameStop from being shorted, tanking Wall Street veterans in the process.

They have since also piled into cryptocurrencies, driving “meme token” Dogecoin to record highs and pumping up the value of anything from silver to lumber.

Hedge funds can no longer look down on them as people who follow the leader.

But lowering the entry barrier to the stock market has meant a lot of novices are trading money they cannot afford to lose.

Insider is launching Ask An Analyst – an advice column that aims to make you a better trader with straight forward responses to basic questions.

Read the column: How to find stocks with the most growth potential

This isn’t about listing stock picks. If you’ve wondered “how much research should I be doing on a stock? What am I doing right? What am I doing wrong?” this is the column for you.

Our columnist is Ryan Paisey, a veteran trader who has been in markets for nearly 20 years, and runs trader news service PriapusIQ.

“For too many players, the basic knowledge of the games we play are lacking, they are more concerned with guessing ‘up or down’ than understanding the basics which can immeasurably help improve their decision making process,” he says.

“I’m not here to tell you how to trade. I am here to share my 20 years of experience with those that have questions which only experience can answer.”

To submit your question, email jsommers@insider.com with “Ask An Analyst” in the subject line.

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New rules could tackle the ‘gamification’ of trading on popular apps following GameStop, SEC chief Gary Gensler says

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Gary Gensler is the new head of the Securities and Exchange Commission.

New rules may be needed to tackle the “gamification” of trading on popular apps, which can prompt users to make bad investing decisions, according to the new head of the Securities and Exchange Commission.

Gary Gensler said in written testimony to Congress on Wednesday that many of the US’s regulations on trading were created before fast and commission-free apps started to dominate the retail investing landscape.

In particular, Gensler expressed concern about the “gamification” of retail trading. Apps are increasingly using features like points, rewards, leaderboards, bonuses and competitions to boost user engagement, he said.

Gensler is set to appear before the House Committee on Financial Services on Thursday, as part of its investigation into January’s GameStop saga, which saw retail traders unite to pump up the video game store’s stock.

Some lawmakers have become concerned about the influence of Robinhood, the commission-free trading app that has boomed in popularity and was at the centre of January’s volatility.

The new boss of the SEC – the powerful regulator that oversees US financial markets – said the gamification of trading could be costly to users.

“If we watch a movie that a streaming app recommends and don’t like it, we might lose a couple of hours of our evening,” he said.

“Following the wrong prompt on a trading app, however, could have a substantial effect on a saver’s financial position. A big loss could have immediate implications for the app user’s ability to afford their rent or pay other important bills. A small loss now could compound into a significant loss at retirement.

“Many of these features encourage investors to trade more. Some academic studies suggest more active trading or even day trading results in lower returns for the average trader.”

Gensler said these issues may require new rules. “Many of our regulations were largely written before these recent technologies and communication practices became prevalent. I think we need to evaluate our rules, and we may find that we need to freshen up our rule set.”

The House will begin the third of its hearings into the GameStop saga on Thursday. It is particularly focused on the impact of modern trading apps and the power they can have, after many of them suspended trading and shut out users during January’s market volatility.

Apps like Robinhood argue their popular and easy-to-use platforms have broken down barriers to investing.

Speaking before the House during an earlier part of the hearing in February, Robinhood CEO Vlad Tenev said: “The mobile app provides the intuitive experience customers want, while also providing them with tools and information to learn about investing and keep tabs on their finances.”

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Robinhood traders boosted the value of the stock market in the depths of the pandemic, but the rise of retail traders also means ‘extraordinary volatility’ may be the new normal, study says

Robinhood on cellphone
Robinhood app

Robinhood traders boosted the market’s recovery by adding 1% to the aggregate US stock market valuation in the second quarter of 2020, a study by the Swiss Finance Institute found. Traders also added 20% to the value of small-cap stocks.

The study, first reported by Bloomberg, also revealed that Robinhood traders had an impact five times the size of their assets in the second quarter. Retail traders on the platform, according to researchers Philippe van der Beck and Coralie Jaunin, also alleviated the stock market crash during the first quarter of last year by 0.6%. The paper was published in SSRN, a publisher of scholarly and academic research, in January 2021.

“The price impact of Robinhood traders is concentrated towards small-cap stocks and the consumer staples industry.” the pair wrote. “However, they are able to affect the price of some large companies, which are being held primarily by passive investors.”

The pair concluded that individual retail investors react more strongly to price changes.

“We show that when institutions react sluggishly to non-fundamental price changes, the mechanism stifles and retail demand shocks can have substantial impacts on stock prices,” the pair wrote.

Moving forward, the researchers found that if the role of Robinhood, “facilitated by novel fintech solutions,” continues to grow, the “extraordinary volatility observed during the pandemic may turn out to be the new normal.”

“The prominent role of Robinhood traders in driving returns evokes concerns about the future role of retail trading in equity markets,” the pair said.

The rapid rise of retail investors has been a powerful force in the stock market, enabled by a range of factors including commission-free trading, distribution of government stimulus checks, and heightened pandemic boredom as many people continue to work from home.

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