Retail investors remain strong amid slowing markets

Teresa Clark stays

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Teresa Clark remains “unfazed” by recent declines in global stock markets, despite her investments in a period of extreme volatility.

Teresa Clark remains “unfazed” by recent declines in global stock markets, despite being a 26-year-old amateur investor during a period of extreme volatility.

Clark​ has been investing on the fractional stock investing platform, Hatch, for just over a year.

During that period, it has seen stocks on global exchanges such as Wall Street fall from record highs to the worst half-year performance since the 1970s.

But the turmoil hasn’t changed its investment strategy, and retail stock investing platforms say this behavior is becoming normal as investors stick to their guns throughout the ups and downs.

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Clark started investing in Hatch after seeing the paltry returns offered by many bank term deposits and says she has no regrets entering the stock market when she did.

“Yeah, my wallet dropped, but it’s no worse than having your money in a term deposit for a year and walking out at the end with next to nothing,” Clark says.

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Jarred Sewell, head of platform at Hatch, says Clark’s behavior is a common theme among Hatch investors.

“We continue to have a buy/sell ratio of three to one in July that we had in January. This shows that the behavior of investors has been consistent. Investors buy through the good times and the bad times,” says Sewell.

But while the buy-to-sell ratio remains the same, the overall value of investments has fallen by 40%, from $170 million in January to $100 million in June.

He says this reflected the fact that many Hatch investors were sitting on the sidelines assessing value opportunities in a bear market.

Sharesies co-CEO Leighton Roberts says that while the platform has also seen a drop in large lump-sum investments, between 60,000 and 50,000 investors continue to use the auto-invest feature.

Roberts says a survey of Sharesies investors found that 90% of users remain calm.

“It’s different from the last time we saw a decline in March 2020, where there was a lot of fear and a bit of panic in the broader market. This time we’re seeing people take a view at longer term,” says Roberts.

Over the past year, global markets have gone from record highs to record lows, but retail investors continue to weather the storm.

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Over the past year, global markets have gone from record highs to record lows, but retail investors continue to weather the storm.

The amount of value of Sharesies investments is also falling as the owners had little cash due to rising interest rates, he says.

But Roberts says he was surprised at how strong investor engagement remained throughout the volatility.

“We think the retail investor has reached a good point in their training thanks to the work of us and other platforms over the last five years. Investing has really come back into the mainstream.

Hamilton Hindin Green’s investment adviser Grant Williamson says it’s encouraging to see unsophisticated investors not rushing into rash decisions.

“It’s a period of sustained volatility, so it makes perfect sense to sit tight,” Williamson says.

But investors need to make sure they regularly review the companies in their portfolios, or risk owning a company that won’t rebound when the market rebounds, he says.

It’s important to maintain a long-term horizon and not place all of your investments in one corner of the market, such as the tech sector, he says.