Do you manage your own investment funds? If so, you're in a club that continues to grow in size, despite the fact that the recent market rally has left many investors unconvinced. Recent data found that online brokers, the most common home for retail investors, have gained three percentage points of market share, representing a 19% annual growth rate, while wire houses like Morgan Stanley and Goldman Sachs have lost 1.1 points. Other retail brokerages, companies that manage money on behalf of clients, lost four percentage points in the same period.

If more individuals are electing to invest their money on their own, why is this happening on such a large scale?

2008 and 2009 proved to be a wakeup call for consumers. They found that their money was at serious risk and the people they trusted to guard their funds were just as surprised as they were. In their mind, they were paying big fees for very little protection, leading them to believe that they could do a better job managing their own money.

With the events of the Great Recession still fresh in their minds, according to an article in Investment News, a trade publication for financial advisers, retail customers feel like they are in better control of their money if they manage it on their own.

Better Research
Thanks to the Internet, retail investors have access to more information than ever. The information not only includes earnings reports and stock quotes, but educational content from the world's top investors. Not only does the individual investor have access to much of the same information as the pros, finding relevant information is easy. If you don't know where to look, there are plenty of educational articles that tell you how to sift through the huge volume of information.

Financial Media
Love it or hate it, the amount of media outlets dedicated to the financial markets continues to increase, and they have become a 24-hour-per-day presence. Even if you're not close to a TV, their smartphone apps and breaking news notifications allow the investor to stay up-to-date, regardless of where they are.

Some experts argue that the financial media encourages irresponsible behavior like noise trading, without the knowledge to be profitable, but there's no doubt that this relatively new source of information has caught the eye of investors of all levels.

Popularity of ETFs
There are now more than 1,000 exchange traded funds on the market. ETFs offer the retail investor a low-cost way to diversify their portfolio without having to use mutual funds. There are ETFs for all sectors of the market, allowing broad diversification to be achieved without professional level knowledge.

Social Media
How would you like to run your trades past other traders or well-known professionals? Social media has allowed for great communication amongst traders. Social media has allowed for greater communication between individuals in the market. Most discount brokers now have robust message boards and real-time chat platforms, allowing the trader to gain valuable input before committing real money. Other social media platforms like StockTwits and Facebook provide real-time information.

The Bottom Line
The retail investor is gaining ground, but a tool is only as effective as the person using it. Many discount brokers offer virtual or paper trading accounts where the new investor can trade fake money until they have the experience to manage their own funds. Some argue that the oversimplification of stock market information leads investors to believe that managing assets is easy and that may lead to significant losses. Retail investors without the knowledge and experience to effectively manage their investments should still leave retirement funds to those who understand portfolio management.

Related Articles
  1. Investing

    In Search of the Rate-Proof Portfolio

    After October’s better-than-expected employment report, a December Federal Reserve (Fed) liftoff is looking more likely than it was earlier this fall.
  2. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  3. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  4. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  5. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  6. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  7. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  8. Mutual Funds & ETFs

    Best 3 Vanguard Mutual Funds for Retirement

    Discover the top Vanguard target-date retirement funds with target dates in 2020, 2030 and 2050, and learn about the characteristics of these funds.
  9. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  10. Fundamental Analysis

    Top Private Equity Bargains for Your Portfolio

    Investing in private equity firms can lead to long-term profits.
  1. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>
  2. Why do financial advisors dislike target-date funds?

    Financial advisors dislike target-date funds because these funds tend to charge high fees and have limited histories. It ... Read Full Answer >>
  3. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  4. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  5. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  6. What fees do financial advisors charge?

    Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  5. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
Trading Center