The stock market has always been a risky place dominated by big sharks and Wall Street traders.
However, an increasing number of casual retail investors are jumping in the mix and changing how the game is played.
In fact, new statistics show that 46% of people have used some of their latest stimulus money to get into stock investing.
A year ago in March 2020, 57% of people used their first stimulus check to pay for necessities, but this time around they want to make some money on stocks.
This comes according to a survey done by the investment app Betterment.
About 54% of respondents said that the pandemic made them trade more often.
The idea that retail investing will continue to be a phenomenon may not be far-fetched at all, even if the meme stock fad subsides somewhat. pic.twitter.com/tPYkID263s
— cesar jose fernandez (@cesargestos) June 24, 2021
What Does This Mean?
The main thing that this means is that many people are starting to do better economically; they have enough stability to use some extra funds on investing.
That’s a good thing, but it also changes the nature of investing and how it works.
In fact, 49% of those surveyed said they haven’t even been trading for two years yet and that they’re very new to it.
Part of the issue here is that many people got into stocks due to the buzz over Gamestop (GME), AMC, and Build-a-Bear.
These stocks surged thanks to Reddit groups where retail traders pumped up stocks to record levels.
What Are People Investing In?
Of course not all these new traders are just going for meme stocks or Reddit picks. There is a wide variety of what new retail investors are deciding to put their money in.
According to the Betterment survey, the main thing driving people to invest is what they know from their own life.
They invest in companies they see around them, shop at or are aware of. Second up is social media accounts and people online who they get advice from; a close third is discussions with loved ones or friends who give them advice and ideas about what to invest in.
(Bloomberg) — Investors are witnessing the biggest U.S. fantasy trip of all time in the stock market thanks to a clueless Federal Reserve, speedy stimulus…Read more: https://t.co/yqJmdW4QM7
— webnow🌎 (@webnowcompany) June 24, 2021
The Bottom Line
The bottom line here is that normal people want a piece of the pie. That means that the old rules are shifting and there are all sorts of opportunities.
However, it also means that there is even more market volatility and you should proceed with caution.
This particularly applies with stocks driven by memes or by Reddit discussions; there is not a lot backing them up on the fundamentals in their financials, so you should take care.
As always, doing your due diligence is highly recommended; it’s also smart to invest in blue chip (high value) companies which have a long term positive outlook.
Avoid day trading where you flip stocks every few hours for short term gain; it is highly volatile and unpredictable and has led many traders to their ruin – even experienced traders.