How Retail Investors Benefit From the Stock Market

Retail Investors have a surprisingly large influence on the markets. Armed with stimulus checks and boredom (or Reddit and meme stocks), they can move the needle on big companies.

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Retail investors play a critical role in the capital market, providing long term funds that build businesses. But, what are the benefits of retail investing?

Freedom to Invest

When you invest in funds that focus on growing the value of your investments over time, you can increase your purchasing power and grow your wealth. This allows you to meet your financial goals while providing income that can help you retire or live comfortably.

Private sector and capital market leaders have been pushing back against efforts to restrict investors’ ability to consider environmental, social and governance (ESG) factors. These leaders know that assessing and managing risk is a core responsibility of their fiduciary duties and that policies designed to limit this analysis undermine the long-term success of their businesses, investment portfolios and communities.

Centrist business voices and state financial officers have been particularly alarmed at these politically motivated attacks, with Republican NH Governor Sununu calling anti-ESG efforts “government overreach.” Hundreds of companies, investors, pension funds and industry associations have signed onto a statement coordinated by Ceres Global, urging policymakers to protect the freedom to invest responsibly.

Freedom to Trade

The freedom to trade is a moral imperative, a clear and manifest societal benefit, and a foundation of the modern economic system that provides historically unprecedented opportunities for prosperity. Unfortunately, the freedom to trade lacks constitutional specification, and throughout America’s history, groups have attempted to use government power to restrict others’ freedom to trade in order to advance their own narrow economic interests. This debate often involves not only tariffs and NTBs, but broader issues such as differences in regulation or monetary policy between countries.

Stability

Retail Investors provide a steady stream of capital to businesses, which are often overlooked by institutional investors. They also play a key role in building the stock market and economy of a country.

A retail investor is an individual who invests or trades in debt, shares and other securities through traditional or online brokers. They usually invest smaller amounts less frequently than institutional investors.

Having a dedicated team member who is responsible for educating your retail investor base in an open and transparent manner will help build trusting relationships and make them more willing to listen when news comes out. Having this point of contact will also allow you to communicate with them via newsletters and digest news in bite-sized pieces that are easier to understand.

As retail investors tend to be swayed by the information and recommendations provided by intermediaries like financial media, analysts’ recommendations etc., the information degree of market prices is more sensitive to changes in retail investor sentiment.

Access to Information

While professional investors with their capital and large research teams may seem to have an insurmountable advantage, retail investors are gaining a foothold. With access to solid financial information and investment education, plus trading apps that allow you to make low-cost trades, retail investors can have their own advantages. This goes back to the circle of competence concept – where one can develop a niche skill in the marketplace that leads to outsized gains.

In addition, the right to universal access to information is a fundamental component of democracy and can improve government transparency, making it possible for citizens to participate in official decision-making and hold governments accountable. This is an opportunity for civil society to help push governments for the implementation of access to information laws, in collaboration with private sector partners.