2020 might become known as the year retail interest in stock-picking hit its growth curve.
If the first few weeks of 2021 are any indication, the retail revolution is looking increasingly bullish. Up to this point, it has been hard to substantiate the impact of COVID-19 and the GameStop short-squeeze on retail participation. However, that fog of mystery is starting to clear thanks to a recent Morning Consult survey about retail investing.
The new Morning Consult survey polled 2,200 American adults. Participants were asked about everything from where they research their investment decisions, their thoughts on regulation and where they would assign blame for the aggressive move in GameStop’s stock price.
It’s one of the first formal glimpses into the behaviors of retail since the GameStop short-squeeze, and it’s free for anyone to read in their data-rich, 202-page report. Since over 200 pages of numbers might be a hefty read, we’ve synthesized some of the most interesting takeaways:1. 25% of Gen Zers picked up trading stocks in the last year; seeking answers through social media
Gen Zers, which Morning Consult defines as the generation born between 1996 and 2012, are the first generation to have access to no-commission trading apps and a wealth of information from the Internet. It also turns out that they’re coming of age and quickly hopping aboard the investing bandwagon. Over 25% of Gen Zers polled started actively trading stocks in the last year. 42% of polled Gen Zers are now actively investing.
Gen Zers, like other Americans, are seeking information on investing in similar ways to other generations. However, Gen Z is nearly two times more likely to key into social media for investing insights than the average American. In fact, social media is the most popular way in which Gen Zers learn about investing. Over 39% of them say they’re taking notes from Twitter, YouTube and Discord.@girlstalkstocks♬ WITHOUT YOU – The Kid LAROI@jackmartin♬ original sound – Jack Martin
This is some indication that younger investors are rejecting orthodoxy. It also coincides with the increased presence of social investing communities, investing social networks like Public.com and Commonstock, and increased amount of FOMO in markets. It might also partially explain why your 18-year-old neighbor has higher returns than you. Young people are investing in hoards and don’t care about what old-timers have to say. Whether that is a positive or negative is still untold.2. Half of new active retail investors got into trading in the past year
Of the 638 investors who said they “actively trade stocks,” exactly half of them have started trading in the past year. Whether this is generalizable to the public is hard to know, but based on record signups for brokerage apps like Robinhood and Public.com, stock-picking has clearly gained traction throughout COVID-19.
In late 2020, Robinhood reported they had over 13 million users — a far cry from the 3 million they boasted at the start of 2020. In August 2020, other digital brokers reported record revenues (implying millions of new signups). Based on this data alone, it’s pretty easy to back up this seemingly outlandish statistic.3. Active investing remains a boys club; women still prefer investing for the long-term
If you needed to paint a picture of the average investor in America? Well, it’d be an urban-dwelling, Democrat-leaning dude from the Northeast or West coast between the age of 18 and 44. Is stock-picking a traditionally masculine hobby? I would say no, but data from Morning Consult’s survey suggests otherwise. Only 17% of polled women actively trade stocks compared to 42% of men.
Why the difference? Well, we’re only looking at data about active, self-managed retail investors. Women, who tend to be more risk-averse than their male counterparts, appear to prefer passive strategies or experts being in charge of their portfolio.
However, when women take control of their own finances? They beat men by 0.4% annually, according to Fidelity. It’s easy to understand why: most women are open to suggestions, invest for the long-term, and aren’t delusional enough to think they can beat Warren Buffett.
However, stock-picking is gaining traction among women, at least according to the survey. Of the 17% of women who indicated they actively trade stocks, 55% of them started in the last year. Pretty impressive.4. Degree-holders actively trade more than any other group; seek advice from friends, family and social media
When investors were asked about how they learn or get more information about investing, the most popular sources were friends and family (23% of adults), social media (20%), news (19%) and websites about investing (18%). This is particularly remarkable because only 13% of people polled indicated that they’re getting advice from a financial planner.
This departure from convention offers some indication that either:
a) Investors think they can do it for themselves.
b) They don’t have access to a financial planner.
It might not come as a surprise to many that most active investors are more educated, at least in the traditional sense of the definition. 44% of Americans with a Bachelor’s degree and 52% of Americans with a postgraduate degree indicated that they actively trade stocks.
Household income, which is closely related to educational attainment, was also a significant indicator of whether or not an investor described themselves as actively trading stocks. Just 17% of people with an income under $50,000 were actively trading stocks, compared to the 55% of people with an income over $100,000 that were. For America’s middle class (who are making between $50,000 and $100,000), only 36% are actively trading stocks. This doesn’t necessarily mean that people aren’t investing at all. A Gallup poll suggests that 55% of Americans own stock, but it doesn’t indicate to what extent they’re involved in the management of that money.5. 50% of Americans say there’s “not enough regulation” on hedge funds
65% of Americans saw “some” or “a lot” of coverage about the GameStop short squeeze, and it appears they now have their two cents to share about the whole thing. Half of the polled field said there is “not enough regulation” on hedge funds, which is slightly higher than the 45% of Americans who said the same about Wall Street.
As far as where to assign blame for the explosion in GameStop’s price? 39% of those polled said it’s on the hedge funds that shorted GameStop. 32% of them said retail trading platforms that put restrictions on trading should share the blame. Faulting retail investors was mostly unpopular, with only 19% of those polled saying that retail investors should be held accountable.
The good news is that the first GameStop hearing predominately placed blame on trading apps. The bad news is that lawmakers have done very little to dig into what actually happened, increasing the likelihood that no significant change will be made at all.
The post We Read a 200 Page Retail Investing Poll So You Don’t Have To: Here’s the 5 Key Takeaways appeared first on Bullish.