Investopedia’s Silver Reveals New Individual Investor Trends

Dave Nadig grabs time with Investopedia’s Editor-in-Chief Caleb Silver at Future Proof to talk evolving and new individual investor trends.

Key topics:

• Individual investor trends: Silver notes the rise of riskier choices, from sports gambling to meme coins and speculative stocks, alongside a push by younger investors to diversify traditional assets
• Investor Resilience: Individual investors show greater willingness to ride out downturns as rapid market recovery trends reinforced the benefits of staying invested
• Learning from Crisis: The pandemic significantly altered individual investor behavior, leading to new market entrants, novel products, and influx of new investors
• Younger Investors Are Changing the Game: A risk-on investing approach combined with a flood of new investors in recent years are driving changes, and a need for new types of educational content

Transcript 

Opening: Younger Investors, New Trends

Nadig: I look around and I see a real rise of pure risk-taking, whether it's sports gambling, crypto, or crazy stocks that don't make any sense. Is that a problem? Is it a feature or a bug that we now have this enhanced risk-taking atmosphere?

Silver: I think it's the new normal, and I don't think older investors like me are that into it. But when you talk to younger folks — my kids and their friends, they want it all. They want to be able to invest, they want a probability bet, they want a sports bet, they want a crypto bet. I believe we're in this convergence where all of those things smash together at once.

The Truth About Today's Individual Investors

Nadig: Caleb Silver, Investopedia, thank you so much for joining us back at ETF.com. I wanted to talk to you early here because the individual investor market is bananas, and that's changed a lot in the last couple of years since I've been a little bit out of the mix. What's going on with the individual investor right now? Is everything we read true? Are they just all going all degen, double-leveraged everything? What's really going on?

Silver: You left and we went nuts, that's what happened, right? You left, and things just got crazier around here. No, I think a lot changed, obviously, during the pandemic, right? A lot of individual investors – some people got into the market for the first time. Risk was on, things were melting higher, interest rates were low, and people were experimenting with all kinds of new products and new ways to trade and try to make money. I think that got a lot of people into the market for the longer term, but I think it also burnt a few fingers out there.

Nadig: Yeah, we had a down year. People forget over the last five years, we did have one bad one. Did investors run away, or did they sort of learn?

Silver: Individual investors have hung in there, which is something that I like to see. Sometimes you see, after big market spin-outs, individual investors like, "I don't want any part of it anymore. I tried that. I did what I thought was the right thing to do. It didn't work, and I'm out." That's not what we've seen. People have sort of stayed with it.

Now, there are people on all sides of the spectrum. There are people that take a lot of risk, that have taken a lot of risk because there are a lot of risky products out there. But then there are the long-term, marathon-running investors who are in it for the long term and have been building positions – good positions – in really strong, big ETFs and their favorite stocks. We know which stocks they buy and which ETFs they buy—they just continue to buy. In doing so over the last few years, you've done extremely well. That's why we have a record number of 401k millionaires.

Are Individual Investors Getting More Market Savvy?

Nadig: That's crazy, though, that we've seen so many, I don't want to call them nuts products, but we've seen a lot of very high-risk products come out. And what I'm hearing from you is they haven't really caught all of the individual investors; they've been a little bit smarter than that.

Where do investors sit on the investor education timeline here? Did they learn because we had that sort of pullback that really showed them they needed to do something, or has this been a continuous process, and is the industry helping?

Silver: Yeah, well, if you think about where we've been, not just over the last five years but over the last 25 years those that have been in the market through a couple of different crises, like the Financial Crisis, they kind of knew that once we got through COVID, they knew how the government responds to this. They know what happens to the stock market once the government starts to floor interest rates and just rain money from helicopters on everybody, and they've seen that before.

They've also – and you've noticed this as well – the dips are very short, right? These market cycles are so quick these days that you only have a second to be like, "Oh my God, we're in a bear market," and then, and then we're back up 10, 20%. If you got scared and sold out as the market was falling, you realize that's not the right way to do it either.

So, we've become conditioned to the fact that markets recover rather quickly. There are a lot of different products we can get into if we want to try to gain momentum again if we've lost a little bit in a sell-off, or just hang on in there. A lot of people, it wasn't the "don't look at my 401k," it was "I've looked at my 401k, and there's not a lot I can do about it but just hang in there," and they've been rewarded for doing so. So, people have learned some important lessons.

New investors that came in during the pandemic, who just started to trade meme stocks or tried crypto for the first time, who got burned, maybe they've spun out a little bit and not wanted to get back in. But, by and large, you've seen retail investors become much more aggressive, and they've stayed aggressive. Even through the tariff tantrum this spring, individual investors hung in there and were buying the dips. Institutional investors have been bearish for the past six or seven months.

Nadig: Institutional investors have been bearish my whole life. So, there is some of that.

Silver: Paid to be bearish.

Shifting Investment Paradigms

Nadig: Paid to be bearish. On the individual side, though, I see, I look around and I see a real rise of pure risk-taking, whether it's sports gambling, whether it’s crypto, whether it’s meme coins, whether it’s crazy stocks that don't make any sense. Does that cause a problem? You're at the front of the coal mine for the individual investor. Is that a problem, is it a feature, or a bug that we now have this enhanced risk-taking atmosphere amongst individual investors?

Silver: I think it's the new normal, and I don't think older investors like me are that into it. But when you talk to younger folks—my kids and their friends, and the kids who are three to five years older than that in their mid-20s—they want it all. They want to play every which way.

They want to be able to invest, they want a probability bet, they want a sports bet, they want a crypto bet, they want to trade, and they want to long-term invest. So, talk about the Burger King of the industry: they want it all, they want it their way. And they're looking for platforms – and the platforms are happy to give it to them – that will allow them to do all those things.

I believe we're in this convergence, and I think you're going to feel it in the younger generations first because they're the most promiscuous in terms of trying to gamify everything. Where all of those things smash together at once: sports betting, trading, options trading, investing even for the long-term, crypto, and probability. I think it's all kind of in one big blender.

Investor Educational Needs Are Changing

Nadig: And where does Investopedia sit there? You've always been a trusted source for investors trying to learn about everything from “what are interest rates” to the most detailed stuff out there. How do you evolve as Investopedia as the individual investors evolve?

Silver: It's a great question because if you're going to approach the markets in that way – and not everybody is – first of all, we have to have our foundation and all of our fundamental content on how to invest and how to trade so you can do it responsibly. We want people to learn that first. But we've had to create a lot of new content around sports betting, around the crypto universe, around a lot of these new products.

Nadig: So you’re just leaning in?

Silver: Leaning in and saying, "If you're going to do it, make sure you know what you're doing." Our whole thing is know what you own, know how these things work, and make sure that you don't cut your fingers when you're trying to slice tomatoes for the first time in some of these new products. Make sure you understand what you're doing, and then have as many experts on as possible so they can learn from the best so they're not just flying into a wild trade for the first time, blowing themselves up.

And then, you know how it is when people go into a casino. They lose money right away, they go back to their room and watch TV for the rest of the trip. We don't want people to do that. We want people to, even if you lose, even if you've gone in there on a risky bet, we want you to learn how to do it right so you're here for the long-term. So, we've had to do a lot of that, and a lot of that content is on-site, but a lot of it's been social too.

We want to be where the audience is, and it's obvious that a lot of people that follow Investopedia are not just reading our site but they're looking for us on social, creating a ton of video content around that. And then activations in real life at places like Future Proof where we are right now, at universities, in high schools, making sure we are going out to people, breaking down the wall of the website, and actually giving them in-person instruction. I think people are really into that.

Nadig: That sounds great, and honestly, some of the same kind of things we're going to be trying to do at ETF.com. So, look forward to working with you.

Silver: Me too. Congrats.

Nadig: Thanks, Caleb.

Silver: Thanks for having me.