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In 2020, we saw a huge influx of new retail, or individual, investors (hi, that’s us 👋) entering the market. Specifically, many people opened taxable, non-retirement investment accounts for the first time. One report found that these investors are younger (under the age of 45) and more racially/ethnically diverse compared to investors already in the market. A critical factor these new investors cited was the increasing ability to start investing without meeting the high minimums traditionally required. The report also points to the importance of educating new investors in topics ranging from risk and reward, to costs and fees, to tax consequences and other key investing concepts … FWIW to the rescue!
It’s great to see these new market entrants. Barriers that once deterred younger, more diverse investors are being removed, opening up opportunities for them to build and expand their wealth. Even better is that the slew of new products and investing methods that have lowered the threshold for entry aren’t just in the broader market. There is similar momentum in socially responsible investing, and there’s never been a better time to jump in as a values-aligned investor. It seems like new ESG-focused funds and products are launching almost every day, giving individual investors more opportunities to move their money to invest in the world they want.
And even if you’re not ready to invest outside of your 401(k) just yet, there’s still great news for you. Barriers are coming down there as well: In March, the US Department of Labor said it would not enforce Trump-era rules limiting the ability of retirement-plan administrators to consider ESG factors in retirement options. So, there could be even more options coming soon to a 401(k) plan near you.
You *can* sit with us
Last year, individual investors accounted for over 100 million online brokerage accounts. Now, the companies they’re invested in are beginning to give this part of the market specialized attention and a seat at the table.
From Qualcomm using Twitter to speak directly with their investors to AMC’s Investor Connect program, innovative companies are connecting with individual investors like never before. They’re even seeking to disrupt how investors are informed and attracted.