A retail investor is an individual participating in financial markets outside an institutional investment organization. Collectively, retail investors can be small players with surprisingly large market-moving power. section 10.15
Retail investors can influence markets through several channels:
- Buying or selling en masse can create sudden price movements and increase market volatility. section 10.15
- Shared optimism or pessimism can move asset prices independently of underlying fundamentals. section 10.15
- Robo-advisors and digital wealth platforms can widen access to low-cost, diversified portfolios. section 10.15
- Social media and online communities can spread investment ideas and pressure institutions to respond. section 10.15
A market-moving crowd
During the COVID-19 pandemic, retail traders using online platforms such as Robinhood helped fuel sharp stock-price increases. One investor may be a ripple; many acting together can become the weather. section 10.15
