Can Retail Investment Level the Global Financial Playing Field?

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In recent years, the face of investing has gradually begun to change. Where once the markets were dominated by institutional investment firms, we’re now seeing an increasing number of non-professional investors attempting to take on the big fish.

This has generated a large amount of commentary. Many experts suggest this uplift in individual investment could finally level the global financial playing field, weakening the influence of major firms and placing some of the power in the hands of the public.

In this article, we explore what retail investment is and what it could mean for the future of the financial markets.    

What is a retail investor?

A retail or individual investor is a non-professional who buys and sells securities. Let’s say our example trader is wondering how to invest in stocks. They might begin by visiting a website like Buy Shares to work out where to find the best broker. Said directory would list several authorized and regulated options to choose from, as well as containing advice and guidance on how to pick between them, the fees to expect, and how to place an initial order. When registering an account, you should be aware of the basics of share trading, many of the details are covered on this site. Some investors will have different ambitions, so it’s worth deciding what your goal is before you invest.

By selecting any one of the options listed on such a site, the trader could invest their money through this online platform. This would allow them to devise a unique strategy designed in line with their goals and to purchase securities for their personal portfolio. Unlike traditional investment firms, they would be acting in a purely individual, non-professional capacity.

There are many key differences between this kind of trader and institutional investors. Firstly, the former will typically trade on a significantly smaller scale. Secondly, the latter will be professionals, often acting on behalf of someone else e.g. managers of pension or mutual funds.

Why is the retail investment market growing dramatically in 2021

Image by Sergei Tokmakov from Pixabay

The differences between retail and institutional investors are easy enough to understand. What’s less clear to the casual observer are the driving factors behind this surge in the retail investment sector.

In short, the growth in internet investment platforms in recent years is primarily to blame. As with everything in 2021, investing is increasingly moving online. This has driven the same sort of growth in investing as it has in gaming, markedly increasing the sector’s accessibility.

Where once investing was reserved for professionals and those with available funds, it’s now possible for almost anyone to open an account online. All that’s needed to trade is an internet connection and a small sum to get started. Plus, there are a wealth of resources available to inform even the most amateur individual’s trading strategy.

Not only this, but the sheer volume of online trading platforms has forced internet brokers to become increasingly competitive. This means fees and commission have been dramatically scaled back, while everything else has been made cheaper and more financially accessible too.

What this has done is markedly increased the representation of non-professional investors in the financial markets. As a result, these retail traders and the decisions they make now have more of an impact on market movements than ever before.

The result is a dramatic leveling of the playing field – one that is only likely to continue for the foreseeable future.         

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