How Decision-Making and Market Impact is Shifting for Retail Investors
Retail investors’ preferences change over time. This impacts sector strength and the overall direction of markets. Even the methods of interacting with exchanges change as newer products like trading apps, artificial intelligence, and exchange-traded products (ETP) become available.
The influence retail has is growing, and anecdotally shifting preferences happen more quickly. Within this category, there are self-directed investors with different knowledge bases and at different stages of their lives. As people move through different stages, their concerns, outlooks, and risk tolerances adjust. Nasdaq just published its second annual survey of retail investors to measure how their interests are changing and what impact that may have. The survey of 2,000 investors from Gen Z to Baby Boomers uncovered some surprising trends in decision-making, fears, comfort zones, and asset class preferences.
Generational Groupings
There were a number of commonalities exposed by the Nasdaq survey between the different generations. They all listed their greatest concerns to be inflation and recession, but while the youngest (Gen Z, born 1997 – 2012) found housing and real estate a deep concern, the oldest group (Baby Boomers, born 1946 – 1964) are more concerned about tax rate changes. The generations in the middle (Gen X born 1965 –1980) and (Millennials born 1981 – 1996) show a greater concern over interest rate changes.
The survey question sought to understand how much time investors in each generation spent researching buy and sell investment decisions. Of Gen Z, on average 48% spent less than an hour, while 3% of these younger adults evaluated the transaction for at least a month. The next age category, Millennials, spent a bit more time on diligence. Only 28% would buy or sell with less than an hour of thought put into the transaction. Of this group, 4% took a month or longer to decide. This trend toward more time researching research continued as the survey reveals the Gen X greater propensity to spend more time evaluating before a purchase. Only 15% would press the buy or sell button with less than an hour spent understanding the investment – 7% of Gen X investors say they take a month or longer.
A big difference between the youngest and the oldest, is that among the Gen Z investors, although almost half said they spend fewer than 60 minutes researching, 0% said they did not research at all. Of the Baby Boomers surveyed, 24% indicated they spend no time researching before they buy or sell. It’s unclear if this is because the older group is less tech savvy, hires a professional to do the research, or believes they have the knowledge to move without digging deeper.
Overlap in Generational Preferences
Other Trends
Despite their top concerns listed as recession and inflation, 71% of Gen Z and 50% of Millennials say they are investing more aggressively. This is in stark difference to the 9% of Boomers and 20% of Gen X describing their strategies as more aggressive than the previous year.
The influence of Twitter, Facebook and even TikTok keeps expanding. 73% of Gen Z use TikTok as a source for investment information. This is an 18% increase from the prior year. Baby boomer TikTok investment use rose by 16% to its current 25%.
The investment themes from year-to-year show ESG and crypto interest sinking, while robotics and other autonomous technology is where the focus has increased most. Younger investors are more active in their investments than before, and more frequently conducting their own research ahead of transacting. Investors of all ages are more likely to consider alternative options than they had before, these could include options, cryptocurrencies, exchange traded products, etc.
Competition among brokerage platforms is as fierce as it is in any innovative, tech heavy industry. The availability of advanced technology and commission-free trading have made investing more accessible, especially for the younger investors.
Take Away
The second annual survey conducted by Nasdaq indicates that the retail investor growth and power we’ve experienced in recent years was not a fad, it is growing and becoming more sophisticated. They are more influential and should be understood as they are here to stay. This is expected to continue to disrupt and influence markets dramatically.
As retail trends take a higher position of importance in defining the day-to-day challenges of investing and mapping the markets’ future, these self-directed investors are finding more services to accommodate them. One source is the Channelchek platform where retail and institutional investors, of all ages can review research reports, absorb video discussions with management of interesting opportunities, expand understanding through daily articles, and, if relevant, attend a roadshow to meet a particular company’s management.
Signup for Channelchek emails and full access here.
Managing Editor, Channelchek
Sources