The Investing Boom Goes Far Beyond Reddit

The Investing Boom Goes Far Beyond Reddit

A recent article in The Atlantic posits that the current investing boom is being driven by more than just the “Reddit Bros” and that individual investors now span a broad spectrum of the population in terms of race, gender, and class.

Though the Redditors are credited with driving up the share price of GameStop in January, and take up a lot of space in the public discourse about the online investing boom, in reality that boom goes beyond r/WallStreetBets. A whopping 10 million plus Americans opened new brokerage accounts in 2020, most of them self-directed without an advisor, and according to the cross-section of analysts, investors, and managers interviewed for the article, they are much more diverse than the typical young, white male in the public’s imagination.

The everyman-investor craze was fueled last year when the Fed poured trillions of dollars into the financial system to get it back on track in the midst of the pandemic. Despite record unemployment and general uncertainty, the S&P 500 skyrocketed, with individual investors responsible for about 20% of all stock trading—double from a decade ago. Until just a generation ago, anyone without a hefty pension, a nice 401(k) or the means to hire their own broker was largely on the sidelines, but with the rise of cheap and easy mobile brokerage apps like Robinhood, anyone can get in the game now.

More than 50% of all new investors are Millennials, and the median account balance of Robinhood users is $240. While the 18 million funded account holders at Robinhood doesn’t compare to the 30 million users at more traditional brokerages like Fidelity, it’s still striking—and those traditional brokerages also added millions of younger users last year. They aren’t pros, but they’re using resources like TikTok and Twitter to educate themselves, joining in on meme-stock trading as well as mainstream investing to challenge short-selling hedge funds such as those that bet against GameStop.

Some analysts interviewed for the article feel that Robinhood relies too much on mindless trading. The company was slapped with a fine in June for failing “to exercise due diligence.” And some feel that online spaces like Reddit are marred by toxic masculinity and blatant homophobia. But they also point to an encouraging new survey that reveals 3x as many Black investors entering the market for the first time last year, and more than 60% of Black Americans under 40 now have money in the market. And many of those younger, newer investors are entering the cryptocurrency market, with one former Wall Street trader calling crypto “a big melting pot.”

This influx of “Generation Investor” into the market tips the scales against the corrosion of social mobility that many Americans feel, and brings with it the optimistic belief that retail investing is something anyone can do, and succeed at.