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Friday, December 2, 2022

Retail investors comprise 10 percent of U.S. daily trading

Retail investors

The Russell 3000 includes 3,000 of the biggest stocks traded in the U.S., which account for nearly 98 percent of all equity securities in the country

Retail investors now comprise 10 percent of daily trading on the wide-ranging U.S. stocks index Russell 3000, U.S. News & World Report reported on Wednesday, citing a note from Morgan Stanley.

The Russell 3000 includes 3,000 of the biggest stocks traded in the U.S., which account for nearly 98 percent of all equity securities in the country. The index hit a peak of 15 percent in September of last year.

Average daily trading volume on the Russell 3000 index hit $380 billion since the end of last week, with retailer investors adding nearly $38 billion daily, the news outlet reported, citing Refinitiv data. By way of comparison, individual investors make up 5 percent of the total market value, according to data from Euronext.

We find that retail investors tend to prefer companies in sectors they are likely to be familiar with as consumers, such as consumer discretionary, communication services, and technology, Morgan Stanley said in a note, per U.S. News.

Morgan Stanley tapped its own methodologies for the study period of July 2016 to June 2021 and discovered that stocks with a high volume of individual trades outperformed stocks with a lower number of retail investors.

The stock buys from individual investors rallied last year and into early 2021 from meme stock trading that included GameStop and AMC, with prices surging more than 1,000 percent. The situation was unlike anything professionals in the market had ever seen in recent years.

JPMorgan recently moved to acquire its third FinTech OpenInvest, which offers tools for financial adviser reporting. The company also acquired the U.K. robo-adviser Nutmeg.

Betting against individual investors’ meme stock trades is a move being brought to light, with Goldman Sachs, Citigroup, Bank of America and Jefferies Financial Group adjusting risk controls.


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