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Data Snack: Millennial retail traders rise during the bear market

  • Millennials opened 46% of all new retail trading accounts in the first half of 2022, according to DriveWealth’s Global Investor Report.
  • The ability to invest with small dollar amounts was the most frequently cited motivator to start investing.

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Data Snack: Millennial retail traders rise during the bear market

The Fed's interest rate hikes dealt a devastating blow to the stock market. The Ukraine war and looming recession added more fuel to the fire. While much of smart money walked away during this market downturn, millennial retail traders have been diving headfirst into the bloodbath.  

Tearsheet spoke with Harry Temkin, Chief Information Officer at DriveWealth, to discuss this phenomenon and the results of DriveWealth’s 2022 Global Investor Report. The report showed that despite the market downturn, millennial trading was up considerably. Millennials increased their average trade size from $310 in H1 2022 to $378 in H2 2022.

“It’s been interesting to see that – even amid such heightened volatility in the market this year – millennials are continuing to invest,” said Temkin.

According to Temkin, regardless of this being the worst market since 1970, with the S&P 500 dropping 21% and Nasdaq dropping 33%, access to technology is fundamentally changing how people access the stock market, and younger people are slowly becoming the majority. 

“Technology is breaking down the barriers to entry by providing people of all demographics and wealth stages with access to tools that can help them become owners of their financial futures through their smartphone,” he said. 

DriveWealth’s core offering is fractional trading in US equities. It’s made possible by its patented real-time fractionalization trading technology, also known as the Fracker. The Fracker and other similar technologies allow people to buy a fraction of a stock instead of the whole thing, dropping the bar to entry to as little as less than $1.

It goes without saying that as the growth of mobile trading platforms unfolds, the demographics of the retail trader are transforming. Traditionally characterized as driven by emotions, the retail trader of today is powered by mobile tech, has access to information via social media, and gets AI advice from robo-advisors.    

Based on the report, from a data pool of 12 million users, millennials dominated trading in the first half of 2022. “We’ve seen millennials move away from meme stocks and gravitating toward more tried-and-true names to create their portfolios," says Temkin. 

In addition, the ability to invest with small dollar amounts was the ”most frequently cited motivator” to start investing. Typical of their generation, millennials used investment platforms that meet their trading needs. They also put pressure on fintechs to innovate their product suite to improve access to different markets and reduce financial barriers to entry.

Globally, the report showed that millennials opened 46% of all new retail trading accounts in the first half of 2022. Plus, while the average trade size was $310 across generations, millennials bet above with an average of $370. 

The report also showed that while FAANG stocks dropped, millennials continued to buy income bonds and electric vehicle stocks and load up on some of their favorite brands. The popular tickers across the globe were AAPL, TSLA, AMZN and NVDA.

“Historically, high minimums and whole share purchases have prevented access to US equities for many,” says Temkin. However, since fractionalized stock platforms and digital wallets lowered the barriers and slashed brokerage fees, more people participated. 

In the US, millennial retail traders placed 53% of the total trade orders and opened 45% of all new accounts in the first half of 2022. For American millennial retail traders, the most popular tickers were fixed-income bond funds like Vanguard Tax-Exempt Bond ETF (VTEB) and iShares Short-Term National Muni Bond (SUB). 

Looking forward, with the current interest rates in place, Temkin expects to see a continued influx of cash into brokerage accounts and more traditional equity assets. He also anticipates more fintechs, neobanks, and digital wallets working to open up access to financial markets globally. 

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