Skip to main content

Check out our 3Q2024 Market Review and Investment Outlook for the remainder of 2024

NLG Blog image retail investing

Surprising Positive Pandemic Outcome: A Surge in Retail Investors

Photo of author, Nicole Gabriel, CFP®.
Nicole Gabriel, CFP®
Financial Strategist

The ongoing COVID-19 pandemic has had significant effects on all facets of our lives. Some of these effects have been short-term, like wiping down packages before bringing them in the house. Others have been longer term, like the way people shop for groceries (curbside pick-up) and use of QR code menus by restaurant owners.

Many, if not most, of the pandemic economic outcomes have been extremely negative — the permanent closure of so many small businesses, the reduction in business operation caused by staffing shortages, not to mention our nation’s supply chain disruptions impacting the cost of goods. But there has been one surprising positive from the pandemic, and that was the surge in retail investing in 2020.

According to JMP Securities, individual retail investors opened 10 million new brokerage accounts in 20201, and this growth did not slow down into 2021. JMP estimated more than 7 million new retail clients entered the market in January and February of 20212.

Why are retail investors setting records for getting into the market?

  • Cash is not currently providing growth. Two-year U.S. Treasuries are yielding 0.21% (as of 9/3/21). That means if you invest $100, in two years you will get your $100 and a whopping 21 cents in interest. Locking in your $100 for 30 years in the 30-year U.S. Treasuries will earn you $1.94 in interest!
  • Costs have been lowered. Since 2019 many of the largest brokerages, like Charles Schwab and Fidelity, stopped charging trading commissions. By not charging commissions, investing has become more accessible to those whose investment accounts are not 5 or 6 figures.
  • Apps are more available. According to download data from SimilarWeb, more than 6 million new investors used Robinhood2. While Robinhood has been charged with failing to satisfy best execution, there are many other mobile, easy-to-use platforms.

Who are these new investors?

A recent Schwab survey showed a diverse cross-section of new investors with ages falling between 21 – 75. The survey found that nearly half invest in the stock market, and 15% of those that invest began investing in 20202. Now dubbed the “Generation Investor,” these new investors are different than other generations since they are not delineated by the year the member was born, but rather by the year they began their journey into the market. The median age of Generation Investor (Gen I) is 35, which is a decrease from 48 when compared to the pre-2020 investors. Moreover, the make up of Gen I spans all the traditional generations of Millennials, Gen X, Gen Z, and Baby Boomers.

Positive trends

There have also been positive trends within the non-Gen I investors. Many other Americans had already started their journey by investing in their employer-sponsored 401(k) plans. Voya Financial, an insurance, retirement, and investment company, found that 72% of their plan participants who changed their savings rate in the second quarter of 2021 actually increased it3.

The COVID-19 pandemic brought economic shutdowns, high unemployment rates, and market volatility; but it also highlighted that individuals should prioritize saving over spending. Depending on the individual situation, saving may mean starting an emergency savings fund, increasing one’s contributions to retirement funds, or funding a 529 Plan for a child’s tuition. If saving over spending is already a priority for your family, the next important financial matter for you could be transitioning to a focus on retirement planning. Voya’s research shows that over 60% of Americans believe that the pandemic has made them more focused on planning for retirement.

Whether you are a seasoned investor and retirement planner, a member of Generation Investor, or just focused on building up your emergency fund, please reach out to the advisory team at McKinley Carter Wealth Services with your questions about next steps or how to get started.


Sources:

Related Insights
NLG Blog Single Ladies

Attention Single Ladies: Financial Planning for ♀️ne

As a CFP® Professional, I help clients create, implement and monitor their financial plans. And I especially love working with single women to help them navigate their financial choices and identify potential blind spots that could impact their future. More and more women are becoming proactive when it comes to their financial futures, whether they find themselves suddenly without “a ring on it” or simply choose to maintain their independent lifestyle.

Whatever the case, financial planning for a single woman differs from couples in a variety of ways due to income dynamics, financial responsibilities, and life goals. It’s important for single women to be aware and to understand these factors that affect their financial plan and future retirement. Learn more.

Read More
Empty Nesters TEM

Good News for Moms: An Empty Nest Often Reveals Your Parenting Success

Being an empty nester can be an emotional rollercoaster. Early on, I found myself still wanting to support my kids both emotionally and financially. That’s our calling, right? But now, a few years removed from my youngest child going off on his own after grad school, I’m proud to say I’ve struck the right balance between supporting my kids in any way they need and sitting back to let them figure it out.

We all know parenting presents so many challenges and joys along the way. I have always appreciated that journey — watching them develop into the individuals they have become. I always thought becoming an empty nester would mean I would have a lesser role in their lives, but that’s not really the case. It’s just a different role. Learn more

Read More
I Stock 2147490069

5 Actions to Finish 2024 Strong

Fall is by far my favorite season. One reason why is because it's the time of year we, at McKinley Carter, begin our budgeting and outlook planning for the upcoming year. It is a time for us to assess progress, address things that need attention, and make adjustments as needed. We use what we have learned to help make decisions that put us in the best position to succeed, so that we can continue to do the work we love with clients and our community. We have similar conversations with our clients ― talking through year-end strategies to help them finish strong and be best-prepared for the year ahead. Knowing they have a sound financial plan to act on allows our clients to spend more time focusing on the things that provide them with meaning and purpose, a real return on life. Find out what five actions we like to discuss with clients to help them finish out the year in a strong, impactful way.

Read More
Play