New traders jumping into the market are

more than meets the eye 

Article

September 23, 2021

By Barry Metzger, Managing Director and Head of Schwab Trading and Education 

When the world as we knew it was flipped upside down in March of 2020, it changed more than just our physical behavior as a society. For many, it also changed the way we approach spending, saving, and investing. 

As part of this shift, we’ve seen a wave of new investors get into the market since the beginning of the pandemic—a group we call Generation Investor (Gen I). 

Barry quote

"At Schwab, we have long believed that investing and trading should be accessible to as many people as possible, and we’re inspired to see this new generation of traders beginning their investing journey."

Barry Metzger, Head of Schwab Trading and Education
Barry Metzger, head of Schwab Trading and Education

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Gen I: Following hype or a serious investing type? 

Some industry observers have claimed that new investors these days are uninformed and focused on quick and easy profits. But the opposite is more often true. 

Members of Gen I have a strong appetite for investing education and are focused on both short and long-term goals. On top of that, many are proving to be serious, engaged traders with a commitment to research, learning, and building long-term wealth. 

How do we know? As part of our recent Trader Pulse Survey, we asked this group of new traders about their approach to trading, what factors drive their decision making, and their outlook on the market. 

We’ve highlighted some of the notable results to show how Gen I compares to those who began trading before the pandemic began. 

Taking a nimble approach 

According to our survey, Gen I traders tend to be more flexible with how they invest than experienced traders. 

For instance, when concerns about the Delta variant hit headlines, half of Gen I adjusted their portfolio allocation compared to 29 percent of more experienced traders. The most common adjustment made by newer traders due to the Delta variant emergence was increasing exposure to equities, which half of these traders report doing. 

Gen I traders are also committed to remaining nimble going forward as 45 percent say they adjust their trading plans on a weekly basis. 

But they aren’t making these changes on a whim, they’re watching the market. 

As they think through their trading moves, Gen I traders point to market volatility and trading education and research as the most influential factors that drive their decisions. 

Beyond meme stocks 

In any discussion about trading in 2021, we have to acknowledge the rise of meme stocks. 

When asked about these viral investments, 58 percent of Gen I said they traded meme stocks in 2021 and over half say this trend will likely continue in 2022. 

But even though they’re engaging, it’s with caution. Over half are currently bearish on meme stocks—about the same as more seasoned traders.  

So where are they focusing their strategies? 

Almost half (44%) are considering moving money into equities in general in the near-term and they see the best opportunities for returns in the healthcare, information technology, and financial sectors. Forty-five percent also say they’re considering cryptocurrency in the trading portfolio. Additionally, roughly a third are considering moving money into commodities, cash, or fixed income. 

Hitting the books more than experienced traders  

According to survey results, new investors spend about an hour more each week researching trades and almost two hours more each week consuming trading educational content compared to more seasoned traders. 

And they like to take a DIY approach. More than half (56%) say they find satisfaction in doing their own research and building their own portfolio. 

Perhaps not surprisingly, Gen I traders are significantly more likely than experienced traders to look to social media for trading intelligence (35% vs. 20%). 

That said, the top resources they use to help make trading decisions are still the more traditional places like online news articles, commentaries and research reports available through their trading firms or elsewhere. 

Looking ahead 

Overall, Gen I traders and their more experienced counterparts have a similar outlook on the markets with 36 percent and 35 percent respectively feeling bullish on the U.S. equities market. 

There’s a fairly even divide within Gen I on whether the retail trading boom that began in 2020 will continue. Slightly more believe it will and others think it will slow but remain elevated.  

The rise of commission-free trading, low investing minimums, and developments like fractional shares investing, in combination with the widespread availability of sophisticated trading tools and education have made investing and trading more accessible than ever before. 

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Investing involves risks, including loss of principal. This material is intended for informational purposes only and should not be considered a personalized recommendation or investment advice. Investors should review investment strategies for their own particular situations before making any investment decisions.