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Here's why retail investors get a 'really bad rap': analyst

Here's why retail investors get a 'really bad rap': analyst

Video Transcript

- I think that retail investors get a really bad rap. We do plenty of surveys on retail investors across brokerage platforms and many retail investors are those long-term investors who are investing to build that nest egg or build-- or to invest for retirement, if you will. They're the type of investors that may check their account often, but they don't necessarily buy or sell things as quickly as they're portrayed in the media. So we have to also understand the crowd that we're talking to here.

Well, there will be speculators in any age group and younger investors, again, have a higher risk appetite so they're willing to take on more risk. But at the same time, we have those long-term investors and we have those customers who step in and say, look, I just want to make money over time so my kid can go to college or so I can buy a house 10 years down the road. So with that being said, I mean, we are talking to different camps here. In terms of risk management, we've really told our customers to lean on the numbers here.

Know your entry points. Know your exit points. I mean, along with the great advice Jay shared about knowing your goals and knowing your time horizon, use that to guide you and then lean on the numbers. And be really honest with yourself, too. I mean, a lot of people say that they get into investing to make money and be rich and that's all good and well, but can you narrow that down a little bit. Why do you want to be rich? What do you expect to do with your money in the next five, 10 15, or 20 years? Because believe it or not, that dictates where you put your money.

So we're trying to approach it from a psychological angle as well. You know, telling people that there are different ways to invest, that your friend isn't exactly like you, so, you know, it's great to have friends and follow what they do, but at the same time, you know, know yourself and understand that you deserve a portfolio as personal as you are. And, you know, at the same time too, teach them how markets work and teach them that ups and downs are normal. But the best investments you can make over time, according to history, are the ones you make when the market is most painful. So I know that that's a big mouthful and there are plenty of different angles I could talk about from there, but we approach it in a psychological way and then we try to get the investor to connect to what they need and then we guide them from there.

- Yeah, and let me just expand on that, because in the current market environment, you talk about the ups and downs of trading, Kelly, we've seen vicissitudes of a magnitude that I haven't seen maybe ever and I've been following the markets somewhat closely over the last two decades. Jay has been in this longer than I have. Just wondering how your approach is, especially being a bit more Millennial-focused, on exactly how to navigate this because a lot of people trade based on their first bear market.

And for a lot of people, you know, you can count the pandemic as part of that, but it was so quick it was almost a non-event because we were right back up at highs within, I don't know, six months or so. How are you and your clients, and basically your generation, viewing the markets right now and how are you trying to shore up a little bit more trust that in the long term things probably going to be just fine.

- Yeah, well to be fair I'm going to say something, you know, on the account of all Millennials and Gen Zs out there. We may not have been investing for so long, but we have seen some stuff in our lifetimes. I mean, I'm an older Millennial and my parents were both laid off from their jobs during the great financial crisis. Certainly didn't have an investment portfolio out there, but I felt the financial effects of it. So I think that the criticism of Millennials and Gen Z not seeing a lot of market volatility is a bit unfair there. Not saying that you said it, Jerry, but--

- Yes.

- --I get it a lot and it's just a little off in a way. But, you know, thinking back to where we stand, you know, and how we're seeing these markets. I like to lean on the data. I love looking at how markets have reacted, you know, relative to history and, you know, just how long it takes markets to rebound, because, you know, the average investor, if you ask them how they think the stock market has acted over time, they probably say something like this.

But if you look at the line chart it's like this. The call option on society. So we try to remind our investors of that. We try to tell them about the classic investing advice. Invest in what you know. You know, invest based on what you want to do with your money. You know a lot of investors are really receptive to that, because from a Millennial and Gen Z perspective, we just want to participate in society. We want to do as well as our parents did and more and we're trying to find ways to do it.

You know, investing is one of those ways that you can grow your wealth and we're just asking how to do it and nobody's really answering our questions. But we also bring a psychological component to the table as well. You know, we want to invest our money, but we care about our wellness and we don't want to drive ourselves insane trying to make this money. So I also like to emphasize that, you know, I know investment strategy isn't worth your sanity here and it you're not a day trader, which many people aren't, then that's completely fine. You still have a way to invest.