In a bull market retail comes alive. When the bust happens retail will go away. I don’t think there is anything particularly long term here.
Retail will not enjoy a shit market where everything trades sideways for months or sees the major indexes bank countless down days. They won’t enjoy allocating capital on any of these platforms (and so they will disappear, until the next boom).
It’s almost a matter of loyalty with retail honestly.
I don't see it truly changing how investing works. After all, the recent events are not all that different than what we saw during the original dotcom boom, where people would talk on Yahoo boards about their favorite stocks, and you'd get accidental retail pump & dumps just like we've seen recently. This is not a new pattern, it is just a new generation going through it.
What I do see changing is pricing. Robinhood proved that it is a viable business model for brokers to monetize interest on non-invested balances instead of charging per trade. The pricing will definitely go down in the future, and there may be more experimentation with other pricing models.
Robinhood hardly, if at all, monetizes interest on non-invested balances anymore. Their cash-management feature sweeps any uninvested funds into FDIC insuranced accounts with partner banks, earning typical Savings accounts interest rates: 2% before Covid, and currently 0.30%.
Venmo, PayPal, and CashApp are the ones monetizing interest on their clients' funds, essentially acting as a checking account paying 0% interest.
Investing is boring due to wading through financial statements 10Ks, 10Qs, Earnings call transcripts.
When everyone finds investing exciting it is a sure sign that the bull market is in full force. As other have said. A crash will come, a lot of people will loose money because they invested emotionally without doing the boring work and they will only be back after another bull run.
Traditionally hedge funds have an information advantage. Retail investors will eat that edge as the internet gives everyone huge amounts of information at their fingertips. We will see the rise of extremely wealthy reddit traders
Hedge funds are increasingly gaining an information advantage from new technologies, like being able to track various proxy data across the globe like shipping volumes that don't show up on balance sheets yet.
They will increasingly come out better than before.
A small portion of intelligent retail investors are also gaining some information advantage due to the proliferation of online resources or data about companies, that traditionally hedge funds only had, or it wasn't as easily accessible as a few clicks away for retail. But they will need keen insight into upcoming trends and an understanding of technology that wall st. doesn't typically possess, along with the ability to read financial metrics.
They will somewhat do better than before.
The majority of retail is just as uninformed, won't have the time or willingness to do proper diligence and financial understanding of companies to invest in (95% gut feeling and hype, 5% being able to read a balance sheet). And now they can be manipulated through social media to act as herd behavior.
I used to work on machine learning data to cleanse and productize data sets for hedge funds. I understand the information access really well. It used to be industry only knowledge that the FED QE will pump the market. Now every retail trader knows it. Alot of things that we are taking for granted now, weren't widespread knowledge previously. Hedge funds have less of an information edge than you think. The insider credit card information they trade off of quickly loses alpha. All of the funds own the same data sets and essentially compete away the profits. Alot of their returns come from pure momentum and trend following, which honestly, doesn't take a rocket scientist. We are only at the beginning of the proliferation of information.
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Retail will not enjoy a shit market where everything trades sideways for months or sees the major indexes bank countless down days. They won’t enjoy allocating capital on any of these platforms (and so they will disappear, until the next boom).
It’s almost a matter of loyalty with retail honestly.