Nov 26, 2020
Global Stock Markets No Longer a Challenge for Retail Investors
Countries across the globe are today aided by a high consumption rate and a subsequent high growth rate. In unprecedented times of crisis, such as today, emerging economies are expected to be at the forefront of economic recovery for the entire world.
Investors, over the past few months, have definitely benefited from the stock market rallies across the globe. So, if investors are benefitting from their investment within domestic options, why are increasing number of investors looking for investment opportunities in global market? The answer becomes evident if one tries to analyze the different trends over the past 2 decades, in stock markets across the globe.
For instance, if we look at the financial crises of 2008–2009, it will be evident then Sensex plummeted even more so as compared to the S&P 500 and FTSE 100. However, after the crises withered off, both India and China have witnessed enthralling rallies in their respective stock markets till date. In times of downturns, there are certain economies, which are hit worse as compared to others. Similarly, there are certain economies, which require longer to recover from downturns. Thus, diversifying one’s portfolio by including assets from multiple regions can go a long way in mitigating losses.
Let us have a look at commodity investments, which often offer the investors a benefit while hedging against inflation. Commodity investments can offer huge benefits, if one gauges for options beyond domestic markets, for the plain fact that, several economies have geographies with certain rich in value commodities. To benefit from the upward movement of these commodities, investors have to choose economies, which are large producers of high-potential commodities.
The digital age, has made investors around the world aware, regarding the happenings in each nation, as well as their economic performances. Investors are often looking for avenues to invest in diverse geographies to take advantage of regional economic growths.
The last decade has seen the advent of low to no cost brokerage firms. The new investing platforms in the market today allow users to invest across a variety of securities, have no additional costs, and are very user-friendly. These aspects of new investing platforms, have lured in the enthusiasm of new and often young retail investors, who have perceived the abrupt end to the bull run in March 2020, as an opportunity to start investing.
One might wonder, how did we reach at this point and more pressingly, in which direction does retail investing venture hereon forward?
The Advent of Online Investing
With the advent of online investing platforms, investors across the globe suddenly were provided with in-depth information, an array of investing ideas, and varied perspectives, which, they were deprived of before. These online investing platforms brought in radical change in every industry. Organizations began to focus more on maintain healthy balance sheets, as more and more investors, were now pooling in to gauge their performance data. One company’s success ushered the others to follow the suit, and thus a chain reaction urged all companies to perform better.
The discount brokerage firms across the globe have offered retail investors the opportunity to invest at a rate, which the likes of Wall Street and Dalal Street could never. Ease of use coupled with lower costs, has caused increased number of retail investors who own varied securities either indirectly or directly.
We Are Here Today
Covid-19 pandemic created a havoc in the world, and stock markets saw a severe decline between 1st January 2020 to 31st March 2020. However, during this downfall, new retail investors saw an opportunity to invest and take advantages of stocks hitting their multi-year lows. Owing this awareness, over the past six months, there has been an unprecedented increase in new account opening with discount brokerage companies.
The declining stock markets, attracted investors who are rich in time and money. A majority of these investors have a buy and hold strategy in place, and perceived the lows in the stock markets as a ‘once in a lifetime’ opportunity.
People who witnessed certain companies increase significantly in their valuations, leaped at the chance of dips, and bought the shares. Moreover, with little to no entertainment events taking place, sports bettors have also jumped into the stock market. These aspects have encouraged the retail investors to increase their investment portfolio in this pandemic.
The results of this radical change in the ecosystem of investing has been evident, in the millions of new accounts being opened with discount-brokerage firms.
A New Avenue for Retail Investors: Global Markets
Flashes, such as the one caused by the current pandemic, often attracts flocks of new retail investors. However, investors often stick around for growth potential.
We are witnessing a gradual increase in the employment and comfort level with new technologies, including predictive analytics, APIs, biometrics, and media integration tools. Brokerage houses such as Robinhood, are leveraging these technologies to foster investor engagement and scale advice delivery. With the help of these new technologies, they are opening doors to the global stock markets, for retail investors.
Retail investors, with novel investing platforms, will now have assistance for investing in global markets. Brokerage houses have gauged that increasing number of risk-happy, younger investors are venturing into the markets, and they require a certain level of assistance in the same. These platforms have witnesses growth in the recent past due to increasing awareness pertaining to the global markets, a high-risk tolerance level, and an increased demand for platforms which permit investing in global markets.
A new generation of high-risk tolerating investors and a wave of new technology, are poised to once again radically change the industry. With new investing platforms, global stock markets no longer pose a challenge for retail investors.
Finally, retail investors need to understand that no form of technology can withstand the age-old barriers in an individual’s investing journey — Greed and Fear. Vigilance on the part of retail investors in required, to fend off the attack by human emotions and if they want to succeed by venturing into the stock markets, over the long term.
