The concept of retail trading has become big business in recent times, while it has also been highly popularized through the rise of Reddit groups and investors.
These relatively young individuals, who are commonly referred to as “Robinhood investors” due to their heavy involvement in the equities market, are increasingly active online and through mobile devices, as they use their technological expertise to trade freely through platforms such as the MetaTrader 4.
There’s no doubt that this trend is being driven by Millennials and (to a lesser extent) the members of Generation Z, but how exactly are these demographics looking to invest in an increasingly uncertain economic climate?
The Rise of Retail Trading – Why Does it Appeal to Millennials?
The rise of retail trading was particularly pronounced through 2020, with this partially influenced by the coronavirus pandemic.
In the US alone, there were an estimated 10 new individual and part-time investors who entered the marketplace, with this hike largely accounted for by younger traders who were able to leverage online brokerage sites and zero commission trades.
According to further investigation by Financial Corp, this trend was also replicated in the UK market. What’s more, this study found that younger investors had traded more frequently through 2020, with this describing roughly 46% of Millennials and Generation Z members nationwide.
This is double the average rate across other demographics, including older and institutional traders on these shores.
What’s more, approximately 51% of respondents said that their risk tolerance had increased markedly during 2020, creating a higher demand for derivatives such as currency and speculative indices trading in the equities market.
How Exactly are Millennials and Younger Traders Investing Their Hard-Earned Cash?
Of course, the combination of a higher trading frequency and increased risk tolerance has created a precariously poised retail market place, as while some traders will have made noticeable gains others will have incurred disproportionate and leverage-backed losses.
However, it appears as though Millennials are also becoming increasingly efficient at striking a balance between risk and reward, with this demographic targeting blue-chip stocks that can deliver regular and inflated gains.
For example, Apple is one of the stocks leading the way when it comes to Millennial and Gen Z investments, with the iconic smartphone brand having seen its share price rise to $134.16 from just $69.23 12 months previously.
Of course, there are concerns that this price has inflated due to Covid-19 and the increased reliance on remote communication, while others have argued that the price of shares in businesses such as Apple continue to rise at a disproportionate rate to earnings.
This is true across the whole of the tech market, and there’s no doubt that the rising demand amongst Millennials could well be driving such value increases further.
However, the good news is that Millennials and Gen Z investors are increasingly inclined to diversify their interests, creating more balanced and rewarding portfolios in the process.
For example, the hydrogen-based tech firm and sustainable entity Plug Power is another popular asset amongst Millennials. This trend is particularly prevalent in the US, which continues to blaze a trail for other countries to follow in relation to retail trading.