Self-Directed Investors Changed Their Strategy As A Result Of Covid

Mon, 22 February 2021  |  investing demographics 

A new study of self-directed investors found major shifts in retail investing strategies influenced by the Covid-19 pandemic. According to the study, "Making Money in Mercurial Markets," 70% of investors said they changed their strategy as a direct result of the Covid-19 pandemic, with 19% reporting they changed it "significantly." A sizeable majority (67%) of investors said they mostly see opportunity in market volatility - 54% described volatility as "mostly opportunity, some risk" and 13% saw "all opportunity."

According to the research, 68% of investors increased their stock holdings in the pandemic and nearly one in ten (8%) purchased stocks for the first time. Three in four investors (77%) are trading as much as they were pre-pandemic. More than 2 out of 5 (43%) said they're keeping up their pace of trading, with a third (34%) trading stocks more frequently and 13% "much more" frequently. Two in 5 investors (44%) are shorting stocks. About one in five (20%) stepped up shorting - 14% increased short selling during Covid and 6% shorted stocks for the first time.

A majority (89%) of investors 40 and younger changed their investment strategy as a direct result of the pandemic, compared to 61% of those over 40. 76% increased their stock holdings and 15% purchased stocks for the first time. 69% view market volatility as mostly opportunity, with younger investors thrice as likely as those over 40 to see volatility as all opportunity (24% vs. 8%). More than half (54%) are trading more frequently, 26% much more frequently. About three in four (73%) have placed a short, more than double the one in three investors (30%) over 40. 27% of younger investors are shorting more; 11% are shorting for the first time.

"The convergence of the bull market, ease of online investing and trading, and Covid stay at home orders has created a sea change in the investment landscape. We have seen how retail investors transformed the market with the activity in meme stocks. This pandemic period has been history in the making and our data underscores the retail reckoning that has been coming for a long time," said Dan Pipitone, TradeZero America co-founder.

The survey was conducted online in January with 1,000 self-directed investors who have minimum investable assets of $30,000. Other data points include:

• Bullish market outlook: Most investors have a bullish outlook on the market, with 52% believing that US financial markets will end 2021 higher. 20% say the market will stay at the same level this year. 28% are bearish, believing the market will end lower in 2021.
• Bullish on Biden: About two-thirds (64%) of investors think the Biden administration will have a positive impact on the US stock market and 26% say the impact will be very positive.
• If the market goes south: In a market downturn, about half (48%) would "weather the storm" until markets stabilize and four in ten (43%) said they would "buy stocks on sale," buying more while prices are low. Just 9% of investors would "get out," selling off stocks to limit losses. About half of investors younger than 40 (49%) would buy stocks on sale compared to 40% of those over 40. Half of investors over 40 (51%) would weather the storm, significantly more than the 40% of 40 and younger.
• Market FOMO: 47% of investors are more afraid of "missing out on making money" in the stock market, while 54% are afraid of losing money. 61% of younger investors are more afraid of missing out, compared to 40% of those over 40.
• Market risks: Regarding threats to US financial markets, investors are mostly worried about the economic impacts from Covid-19 (64%), followed by unemployment (36%) and US budget deficits (36%). Only about a quarter of investors (24%) are worried about inflated stock valuations. Other risk factors that concern investors are inflation (27%), the potential for new regulations (27%) and interest rates (24%).
• Broker dealers: For their online brokerage accounts, at 66% more investors said an easy to use web and desktop platform is an essential feature than any other, followed by real-time market data (61%) and commission-free trades (60%). 39% identified customer support by phone as the most essential feature, 38% want a free mobile trading app, and 35% are looking for advanced trading features, such as charting and stock screeners. A free mobile trading app is essential for more than half of investors 40 and under (52%) vs. fewer than 1 in 3 (31%) investors older than 40.

Source: TradeZero America