The Retail Investor Report: They’re not leaving, so what’s next?

Individual investors continue to actively participate in the markets, increasingly diversifying their portfolios with new approaches to research and discovery.

In 2020, a wave of retail investors entered the stock market. During the next two years, approximately 30 million new brokerage accounts were opened in the U.S.¹ By 2021, retail investors comprised 25% of total equities trading volume, nearly double the percentage reported a decade prior.²

And they’ve stuck around. In February 2023, retail investors across platforms set a new all-time high for weekly inflows, with $1.5 billion dollars pouring into the market in a single week.³

Participation in the public markets remains high; and, more significantly, it is evolving. Public’s latest Retail Investing Report dives into what’s new and what’s next. Below is a summary of the findings.

Read the full report →

Retail investors are diversifying across asset classes and strategies

Investors continue diversifying across asset classes, with megatrends and cultural moments sparking the discovery of new investment strategies and opportunities. Increased adoption of fixed-income strategies in 2023 balanced out growth plays that tracked trending technologies and companies.

Key insights:

• Investors on the Public platform have increased the number of distinct asset classes (e.g. stocks, ETFs, T-bills, cryptos, and alts) owned by 25% year-over-year.
• ETFs’ share of portfolio AUM on Public increased 4.4X year-over-year.
• AI thematic ETFs saw a 34% YoY increase in net new investors, with Nvidia (NVDA) emerging as one of the most high-interest stocks on the platform by pageviews and trading volume.
• Cultural buzz, positive and negative, translated into retail investor trades in specific companies. The total number of Public investors in Mattel (MAT) increased 6.6X following the success of “Barbie,” and the total number of investors in Bud Light’s parent company AB InBev (BUD) total investors on Public increased 1.5X amid controversy beginning in April 2023.

Retail investors are increasing their due diligence and adopting new research methods like AI

Retail investors are increasing their focus on due diligence and closely vetting sources for trust and credibility. Nearly one-fifth of investors say they are already using AI for investment research.

Key insights:

• When prioritizing sources for financial information, 69.4% of retail investors say trust and credibility are more important in 2023 vs. 2022. A majority say that these factors are “significantly” more important.
• 19% of retail investors already use AI for investment research, with most holdouts being investors interested in learning how to leverage AI to inform their portfolio strategies.
• The growing role of AI in investment research is balancing social media as a primary channel for decision-making. 16.4% of investors say social buzz is an “important signal” in their decision-making.

Retail investors demonstrate changing attitudes about the economy & their roles as shareholders

Retail investors are entering the remainder of 2023 with confidence despite mixed feelings about the state of the economy. They are also grappling with their roles as shareholders and are divided on the importance of ESG.

Key insights:

• Economic outlook is mixed: 59.9% of retail investors are optimistic or neutral about the economy and 40.1% are pessimistic. That said, a majority of retail investors are confident in their portfolio strategies despite economic uncertainty.
• 31.1% of investors say their risk appetite increased by the end of 1H 2023, compared to 16.7% who reported an increased appetite for risk at the start of the year.
• ESG remains a cultural battleground, with 55% of investors representing anti-ESG sentiment and 45% representing pro-ESG sentiment. Investors are split on whether ESG is a business-driven strategy or a values-driven strategy.
• 27.3% of retail investors say they participated in a proxy vote so far in 2023, with the biggest points of friction being a lack of awareness of the vote and a lack of context around what’s on the ballot.

Retail investors’ engagement in the stock market has remained strong, marked by a shift towards more diversified asset classes and strategies. Notably, the importance of research and information-gathering persists as investors now embrace technologies like AI to inform their choices before taking action.

Read the full report →

Contact press@public.com to learn more.

Additional commentary

“Many investors entered the markets in 2021 around the meme stock frenzy, but we are now seeing a long diversified approach as more investors are looking at fixed income, dividend investing, and AI as new emerging trends,” said Katie Perry, GM of Investor Relations at Public. “If there is one thing that is clear from our survey and the data — it is that retail investors aren’t slowing down, and they still have an appetite to participate in the markets.”

“As scholars who advocate that high school students should be taught basic corporate governance because it is socially unacceptable that individuals are unaware of the power that holding and voting shares carry, we welcome Public’s Retail Investor Report as the wakeup call that policymakers need,” said Sergio Alberto Gramitto Ricci, UMKC School of Law, and Christina Sautter, SMU Dedman School of Law, who have co-authored multiple research papers on retail investor engagement. “Most retail investors who fail to vote their shares do so because they are unaware of their right to vote and of the impact their votes can have. The influence that corporations have on our life, our society, and our planet is comparable to that of governments. Policymakers should level up investing and corporate governance education for virtually everyone as well as promote policies aimed at making information provided by issuers more digestible for the lay person.”

“Reports like these are critical for understanding the changing habits and behaviors of modern retail investors,” said Alex Thaler, Co-Founder and CEO of Iconik, a shareholder engagement technology company. “Specifically, the insights strongly support the need to separate the purely financial aspects of the investing experience from the values-alignment aspects. At the deepest level, conviction to invest follows conviction about growth potential and profitability, and it’s unclear to many investors whether ESG is about growth potential and profitability or values.”

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METHODOLOGY:

This report is informed by data from the Public platform via demonstrated behaviors and activities as well as qualitative surveys of verified retail investors on Public. This report offers a directional perspective on the retail investor market, drawing from Public’s community of investors. Insights shared are not investment advice or an endorsement of any particular investment strategies.

Qualitative research via Public verified investor surveys fielded Jul/Aug-23 (n=1,015), Jun-23 (1,005), and Jan-23 (n=1,036). All surveys reflect the responses of individuals with approved/funded accounts on the Public platform, U.S. adults 18+.

SOURCES CITED:

[1] “Just how mighty are active retail traders?” The Economist (Aug-2021)
[2] “The Rise of Retail Traders,” BNY Mellon (Nov-2021)
[3] “Retail Army Bets $1.5 Billion on Stocks,” BNN Bloomberg via JPMorgan (Feb-2023)

DISCLOSURES:

Open To The Public Investing is a member of FINRA and SIPC. This content is not investment advice. Investing involves risk of loss.

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