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. Mutual Funds & ETFs

    4 Mutual Funds Warren Buffet Would Buy

    Learn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
  2. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  3. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  4. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  5. Bonds & Fixed Income

    High Yield Bond Investing 101

    Taking on high-yield bond investments requires a thorough investigation. Here are looking the fundamentals.
  6. Retirement

    How Robo-Advisors Can Help You and Your Portfolio

    Robo-advisors can add a layer of affordable help and insight to most people's portfolio management efforts, especially as the market continues to mature.
  7. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  8. Professionals

    How to Sell Mutual Funds to Your Clients

    Learn about the various talking points you should cover when discussing mutual funds with clients and how explaining their benefits can help you close the sale.
  9. Professionals

    Fund and ETF Strategies for Volatile Markets

    Looking for short-term fixes in reaction to market volatility? Here are a few strategies — and their downsides.
  10. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!