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Retail investing is in a pandemic with 80% of investors losing money – Front has the vaccine

Retail investing

Retail investors are now making up more than 25% of the stock market but 80% of them are losing

Since the start of 2020, the stock market saw a large boom in the number of retail investors placing their bets – specifically, increasing from just 10% last year to over 25% year-to-date.

When we looked at individual cases we found casual investors who weren’t taking a strategy approach ended up in situations where their returns turn quickly turned negative – depending only on their own limited knowledge of stock evaluation techniques and reading forums such as /r/wsb.

We interviewed Jackson, a participant in our survey, who found himself as part of that 80% after loading money into his account and trying to figure things out as he went. He saw his portfolio end up at -20.36% within 3 weeks.

Since March, we started tracking a randomly selected group of users on Front, other trading platforms (such as Robinhood and eTrade), and those who only had passive investing strategies (such as WealthFront).

Stock portfolio performance over 6 months

  3-20 4-20 5-20 6/20 7-20 8-20 9-20 Profit
S&P 500 2,435 2,845 2,953 3,094 3,224 3,374 3,285  
S&P 500 $10,000 $11,684 $12,127 $12,706 $13,240 $13,856 $13,491 $3,491
Monthly Profit 16.84% 3.80% 4.77% 4.20% 4.65% -2.64% 34.91%
Front $3,512.76 $4,192.13 $4,453.30 $4,753.45 $5,115.19 $5,525.94 $5,458.52 $1,945.76
Monthly Profit 19.34% 6.23% 6.74% 7.61% 8.03% -1.22% 55.39%
Other trading $4,872.98 $5,472.84 $6,032.72 $6,226.97 $6,538.94 $7,054.21 $6,472.24 $1,599.26
Monthly Profit 12.31% 10.23% 3.22% 5.01% 7.88% -8.25% 32.82%
Passive $15,827.44 $16,704.28 $17,018.32 $17,179.99 $17,398.18 $17,716.57 $17,815.78 $1,988.34
Monthly Profit 5.54% 1.88% 0.95% 1.27% 1.83% 0.56% 12.56%

Survey Description: The active investor (Front) average account holdings were $3,512.76 and had 36 participants and the active investors (other trading platforms) had average account holdings of $4,872.98 and had 42 participants. The passive investor’s group had $15,827.44 average account holdings and had 29 participants over a period of 6 months from January 1st, 2020 to June 15th, 2020. All participants were located in the US trading in US currency.

The results were quite definitive for the different groups but what stood out the most are users who invested through Front’s platform. Front gave users passage to finish at 55.39% total profit (or 20.48% higher than the S&P 500) while other trading platforms finished at 32.82% (or -2.09% lower than S&P 500).

 

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