Not “Dumb Money” After All: What Retail Investors Are Doing Now

A few weeks ago – just as the dark comedy “Dumb Money” was hitting theaters – we did our regular check-in with over 4,000 of you savvy investing types to find out how you’re feeling about markets and what your portfolio plans are now, for our latest Modern Investor Pulse. Here’s what you told us…

You’re still optimistic.

The Finimize Index tracks retail investor sentiment across our global community every quarter. In this quarter, 67% of respondents said they expect global stock markets to be higher a year from now – that’s slightly less compared to last quarter and broadly in line with the S&P 500’s direction.

Q: Do you think global stock markets will be higher 12 months from now? Source: Finimize Modern Investor Pulse.

Your appetite for risk is still high.

Almost 60% of respondents are planning to maintain the same level of risk with their investments over the next three months, while 16% plan to take on more risk.

Q: Do you plan to invest more or less money over the next three months?

At the same time, over half (52%) of respondents said they plan to keep steady with their investing plans, putting the same amount into markets as they have been. About a third (32%) plan to invest more, and only 12% plan to reduce the amount they invest over the next three months.

You’ve got cash ready to invest.

A substantial 42% of modern investor survey respondents said they’re holding onto between $5,000 and $100,000 that they plan to invest in the next 12 months. A further 6% plan to invest over $100,000 – and there’s little variation across age groups spanning from 25 to 65. Encouragingly, younger investors showed they’re more affluent than they’re typically given credit for: 79% of 25- to 34-year-olds, for instance, have more than $1,000 in cash that they plan to invest over the next year.

Q: How much cash do you currently have that you plan to invest in the next 12 months?

And, sure, there’s been a dropoff in the amount of cash retail investors have ready to put into markets, but in all likelihood, that’s because they’ve been doing exactly what they said they’d be doing: investing. In the second quarter, around 30% of respondents had between $10,000 and $50,000 that they planned to invest. A quarter later, that figure had fallen to 22%, and it currently sits at just 18%.

You see the gender investment gap narrowing.

Female investors, who’ve been historically overlooked, are set to hold the majority of household wealth within two years and already have significant sums to invest. Our data, based on over 1,000 female respondents, shows that women are confident and optimistic – and actively taking advantage of market opportunities. And what’s more, over 40% of women also feel that the investment gap is closing.

Q: Do you think the gender investment gap is getting better (closing) or worse (widening)? Female respondents only.

You’re betting on stocks, ETFs, and cash.

Retail investors are still keen on stocks. That’s probably no surprise given the wave of excitement around AI this year and the buoyant US stock market that’s come partially as a result, with AI-related tech companies like Nvidia driving some impressive gains. Indeed, 62% of Modern Investor Pulse respondents said they’re looking to allocate money toward stocks.

Exchange-traded funds were the second-most-popular choice among modern retail investors, with 46% planning to put cash into ETFs. Next up were cash products, with 36% of respondents eyeing those up, more than double the 17% who were doing so last quarter. But that stands to reason: higher interest rates on offer to savers make cash products more attractive than they’ve been in a generation.

Q: Where do you plan to invest most of your surplus income over the next 6-12 months?

What’s it all mean?

In the height of the GameStop short-squeeze trading frenzy that eventually drew Hollywood’s attention, commentators speculated that retail investors’ fascination and trading activity would fade away as soon as markets became more challenging. Yet as each quarter passes, those pundits are proved more comprehensively wrong: retail investors are building wealth – and they’re in it for the long haul. They’re increasingly savvy and diversified, and they now account for a bigger proportion of US stock market volumes than they did before the pandemic and the “dumb money” squeeze.

For more detail and analysis, check out the full report.