Platform for Retail Investors





Retail Investors Benefits

Retail Investors are non-professional investors that buy and sell securities using their personal brokerage accounts. They are responsible for the majority of stock market trading.

Recent innovations in brokerage technology have made investing far more accessible to the public. Commission-free trading apps and the ability to purchase fractional shares has allowed a broader segment of the population to partake in direct investing. Visit ICO to learn more.

Freedom to Invest in Smaller Companies

By their nature, smaller companies are less insulated from wider market price movements. This can be a positive or negative depending on an investor’s risk tolerance and the nature of their investment.

Many of the fastest growing and most profitable global businesses started out as small or even unknown businesses. Apple, Amazon, Alphabet and Uber are just a few examples of large multinationals that started out small.

Investing in these younger, more innovative business ventures offers retail investors the opportunity to get in on the ground floor of an up-and-coming company. They can also benefit from dividend payments as the businesses grow into a mature firm.

There are plenty of ways to gain exposure to smaller firms through a well-diversified portfolio. Some include investing in ETFs such as the JPMorgan US Small Cap Growth & Income Trust or the Jupiter UK Smaller Companies Investment Trust. Alternatively, there are a number of specialised trusts that focus on specific geographic regions or sectors such as augmented reality innovator WaveOptics.

Flexibility to Diversify Portfolios

A diversified portfolio is the foundation of any investment strategy. It reduces risk by ensuring that any one individual stock or sector does not affect your entire portfolio in the same way. It can also mitigate systematic risks, like inflation or interest rates, that impact the market and economy as a whole.

Financial experts typically recommend diversifying both within and across asset classes. When investing in stocks, this means spreading out your investments between small, medium and large companies; between different industries (like technology or consumer goods); and between domestic and international markets. It is also recommended to diversify within each of these asset class categories by investing in stocks with various term lengths, credit ratings and market capitalisations.

While this may seem daunting, it’s not impossible for retail investors to achieve their goals through diversification. Many robo-advisors can create a diversified portfolio for you that is tailored to your goals, risk tolerance, and time horizon.

Access to Information

Retail Investors are non-professional investors that invest their own personal capital in assets such as corporate bonds, stocks, securities, mutual funds, and exchange traded funds (ETFs) through traditional or online brokerage firms. They may be active traders or they might choose to work with a financial professional to manage their investments.

Unlike institutional investors who are often able to snap up shares at an initial public offering (IPO) or at a price above the market opening, retail investors are able to invest in smaller companies, potentially improving their returns on investment. However, retail investors are typically unable to access the same research and data that institutional investors have.

This can be mitigated by governments implementing an Access to Information Act and proactively publishing information for citizens. 28 September is the International Day for Universal Access to Information.

Liquidity

Liquidity is the ease with which assets can be turned into cash, with cash being the most liquid asset of all. It can also refer to an individual’s ability to pay off debt or bills on short notice. For a business, liquidity is measured by its current ratio and quick ratio, which compare what it owes to what it owns and are often used as indicators of financial health.

Individuals can improve their own liquidity by ensuring that they are not carrying more cash than they need, and avoiding impulsively investing in the next big thing. They can also plan ahead for major purchases and ensure that they have access to more liquid forms of money, like bank or mortgage loans. Similarly, retail investors can help to keep markets stable by ensuring that stocks held by them are more readily available. A study co-authored by Karlsruhe graduate student Felix Hufner and assistant professor Jan-Oliver Strych found that the stocks held by retail investors experience less volatility and crash risk than those held by institutions.

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