First-Time Investors Now Make Up 15% of Retail Market

Scores of retail investors crowded into the market during the pandemic, establishing a new generation of amateur investors that professionals need to contend with.

Individuals who began investing in 2020 now make up 15 percent of current retail investors, according to a survey published Thursday by Charles Schwab. 

The broker surveyed 1,000 Americans between the ages of 21 and 75. Among those investing in the market, 15 percent joined in 2020, and they were younger as well as more bullish than those who began investing earlier. Schwab, which itself has seen retail clients and assets grow substantially over the past year, deemed the latest wave of traders, “Generation Investor,” or Gen I. 

“A big part of this growth is Generation Investor — the large number of people who are bound together not by their birth years but by when they got started in their investing journey — who are now on a path to ownership and reaching their financial goals,” Jonathan Craig, Schwab’s head of investor services, said in a statement.

The past year has seen a boom in retail trading, as access to low-cost trading platforms like Robinhood, pandemic shutdowns, and unprecedented market volatility drew new investors in. Commentators and some investment professionals have criticized these new traders as speculators who trade on dubious information from social-media site Reddit and don’t try to value companies. 

But the rise of the new-age investors appears to have continued so far in 2021 with the GameStop trading frenzy and other Reddit-inspired stock moves. As Institutional Investor previously reported, the wave of new amateur investors pushed some professionals to reposition their own portfolios in reaction to the so-called meme stock frenzy.

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The survey from Schwab shines a light on some of the attributes that define this new generation of investors. It found that 72 percent are optimistic about the U.S. markets, versus 63 percent of those who started trading before 2020. And 43 percent plan to invest more money this year, compared with 20 percent of prior generations. 

The median age of Gen I is 35, about 13 years younger than those who started investing before 2020, according to Schwab. About half of Gen I said they live paycheck to paycheck, with the overall group’s income averaging at $76,000 per year. According to the survey, Gen I was more likely to have been hit financially by the pandemic, with 39 percent saying their finances were hurt, compared with 28 percent of more established investors. 

Schwab also noted that Gen I’s investment approach has evolved already. The portion of Gen I that was investing for the long term has already grown to 72 percent in 2021, up from 56 percent last year, according to the survey. 

“Now that they’ve dipped their toes into investing, Gen I is eager to keep learning and evolving its strategies to successfully build wealth for the long-term,” said Andrew D’Anna, senior vice president for Schwab’s retail client experience. “What we found in our survey is that this group is not all short-term risk takers — they want to make informed decisions backed by education and professional guidance, which will be important as they navigate different life events.”