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Data Snack: Emerging trends in ‘the decade of the digital investor’

  • Inflows to U.S. equities in 2021 outpaced the previous 20 years.
  • Younger generations are leading the charge when it comes to fractional investing.
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Data Snack: Emerging trends in ‘the decade of the digital investor’

Retail investment had been on an upward trajectory since before COVID-19 became a thing, though admittedly, the pandemic got more people to invest. In 2021, retail trading made up 25% of daily average volumes relative to institutional trading. For comparison, in January 2020, retail trading made up 17.1% of the market. Behind this volume are digital investment platforms that have developed ecosystems where stock trading has become as simple as ordering food. In addition, providing consumers the tools to enable fractional trading has made it easier to enter the market.

DriveWealth, an embedded investment platform that enables 15 million users worldwide to invest in U.S. equities, called the current decade “undoubtedly the decade of the digital investor” in its recent DriveTrends report

The report, based on global customer data, argues that global investors have a growing appetite for American stocks. The S&P 500 index revealed that in 2021, there was almost 29% return and double-digit gains across all 11 sectors. In addition, the report makes a point that fractional trading opens financial opportunities, which in turn drives consumer behavior. The company’s data show these trends in action.

Global consumers interested in the American stock market

  • Since 2020, account openings have increased by 241%. 
  • The momentum is still building, with a 12% increase in account openings in Q4 2021

Fractional trading gaining heat

  • Over 94% of trades on DriveWealth’s platform constitute fractional trading.
  • In 2021, the average trade size decreased to $266
  • During the year, average trade sizes fell some $20 from the first to the second half

Today’s ease of trading has ushered in a new era where consumers are becoming investors, and investors are becoming consumers. That is to say, consumers are making self-guided investments, hence becoming investors themselves, while still consuming financial services to invest. 

Platforms targeting the consumer-investor are creating personalized experiences, guided by three key factors: convenience, trust, and quality. For example, users have come to expect spending, borrowing, and investing products offered together on digital investment platforms rather than in isolation.

The report found a rising trend among younger generations to not only enter the stock market through digital products, but also to lead the charge.

Younger generations eager to invest

  • Over 80% of new accounts were opened by millennials and Gen Z
  • At the end of Q4 2021, accounts opened by Gen Z grew 20% QoQ

Millennials set the pace for trading

  • 70% increase in trades placed by the age group YoY
  • The average trades placed per millennial account in 2021 ranged between 7-11
  • In 2H 2021, millennials led with an average of over 8 trades per quarter

Source: DriveWealth

In 2021, the list of top demanded U.S. equities was dominated by tech companies. Across age demographics, the top 4 demanded stocks were Tesla, Amazon, Apple, and AMC Entertainment. Outside the top 4, millennial and Gen Z investors shared a mutual interest in investing in Meta, while Gen X and boomer investors were drawn to Nvidia. These preferences will help define investment apps and develop better customer experiences, according to the report.

Users are becoming more sophisticated investors, and DriveWealth claims it's already seeing demand for a wide variety of next-gen tools. In 2022, platforms are anticipated to develop tools that help retail investors start early, engage often, automate investing preferences, and interchange investment across asset classes.

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