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'Vast majority' of retail traders are taking the long view, Finimize CEO says

Finimize CEO Max Rofagha joins Yahoo Finance Live to discuss retail traders, meme stocks, index funds, investor sentiment, and the outlook for the market.

Video Transcript


- Yeah, well, that same survey I mentioned that talked about whether retail investors are interested in memes also gives us some broader insight into what's going on because retail investors don't necessarily seem to be fazed by the challenging market that we've seen this year. According to a new survey by Finimize, only 1% of retail traders plan to sell off their investments in the new year. Joining us now to discuss is Max Rofagha, Finimize CEO.

They don't want to sell at a loss for some of them, right, Max? So I guess that's part of what's driving it. You know, Max, we talk a lot here about Wall Street strategists and what they think is going to happen in the new year.

But, obviously, retail investors are a large and growing part of the market as well. And the majority of the folks you surveyed, about 32% said the stocks aren't going to bottom for another six months. What kind of insight and color besides that did you get on where things are going from here?

MAX ROFAGHA: So I think, as you touched on, I think the broad narrative has been around a very small subpopulation of retail investors who invested in these meme stocks. As we saw it in our own survey, only 15% actually invested in these meme stocks. If you look at the actual trading volume data, that lines up.

Most recently, obviously, we saw Bed Bath & Beyond. I think roughly 10% of the trading volume actually came from retail investors. And so we're talking about a very small subpopulation that's shaping the narrative.

And what we're seeing now in the survey that we recently conducted at Finimize is that the vast majority are not day trading but, in fact, are investing for the long term. As we talked about, only 1% were planning to sell off. The vast majority are taking the long-term view and are viewing this for what it is, which is just part of an economic cycle.

- Max, 84% of those surveyed have never invested in a meme stock, like a GameStop, I imagine, we were just talking about. Why do you think that's the case?

MAX ROFAGHA: I think it's because they understand that it's, number one, it's just one stock. It's not diversified. I think number two-- and this is now really coming to the forefront, is that people are really looking at fundamentals again. And I think perhaps over the last couple of months, there was a bit of an oversight, again, within a subpopulation of this. But the overall retail investor population is increasingly looking at fundamental research to assess whether to invest somewhere or whether or not invest somewhere.

- What do you think they're seeing within the fundamentals for some of the individual stocks, specifically in tech, that they seem to be really excited about over the course of the next year, some of the names like Apple, Microsoft, Google, Meta that have popped up in the survey?

MAX ROFAGHA: Well, I think, number one, there is a continuous belief that these large technology firms will continue to shape the business world and the broader society that we live in. I mean, if you look at someone like a Warren Buffett, obviously heavily invested into the likes of an Apple. And so I think people are viewing what's happening currently as perhaps overcorrection in the market that will recover.

Having said that, they also are looking to diversify, again, into other sectors, so going beyond tech, which, as you suggested, the survey says they continue to be bullish on. And they are also looking at other sectors, like the energy sector, which they have a longer-term thesis on.

So I think at the end of the day, it's really just understanding, what are we investing in? What is the thesis? And how can we more broadly diversify? I think that's been the theme over the last couple of months.

- Max, it's also really interesting because so many of the people you surveyed are investing in individual stocks specifically, 72%, another 61% or so in index funds, and that struck me because people still think they can beat the market. And some of them can. But it's really difficult to do.

MAX ROFAGHA: Well, I think, as you say, most of them are-- rather, put differently, the vast majority of them are, in fact, looking to diversify into index funds. But there is a certain school of thought that says, actually, in a downturn, that is when you can perhaps beat the market. That is perhaps when an active fund manager or, in fact, if you have a specific insight or a specific view on the future and evolution of a specific company, that you might be able to, in fact, beat the market.

But again, I think people are saying, let's diversify. Let's get into index funds. And yes, we will continue to look at individual stocks. And at the end of the day, there is also a certain element of enjoying researching stocks and investing into stocks that we cannot forget.

- Well, we certainly enjoy researching and maybe not so much of the investing into stocks, but definitely doing the research and presenting some of that. Finimize CEO Max Rofagha, thanks so much for joining us here today. Some interesting insights there.