The growing role of retail investors: Mass tourism or sustainable transformation?
Financial markets aren’t shaped by economic fundamentals alone. They’re also affected by behavioural dynamics, which are often invisible but decisive. Understanding these dynamics is essential to our investment process. Ignoring today’s behavioural regime would be a costly mistake.
Democratization of markets
The advent of discount brokerage platforms in the mid-1990s revolutionized investing by democratizing the stock market and slashing brokerage fees. In only a few years, the most popular online platforms grew from a few hundred thousand users to several million. Retail participation in the equity market exploded—a phenomenon that the U.S. Federal Reserve attributed to recent higher-than-historical returns and the technological revolution then under way.
Despite this democratization of the markets, a succession of shocks over the next decade—the bursting of the tech bubble, the global financial crisis, and the European sovereign debt crisis—put a damper on household appetite for equities.
The past 10 years have also been fraught with macro-financial turmoil: Brexit, the global pandemic, the trade war, and major armed conflicts, with the most recent causing one of the sharpest energy shocks in recent history. Even so, nothing has shaken investor confidence this time (Chart 1).
Chart 1 – The current behavioural regime cannot be ignored
Retail investors equity allocation (as a percentage of financial assets)
Source: American Association of Individual Investors, May 2026
Description of the chart The current behavioural regime cannot be ignored
This chart shows the equity allocation of U.S. retail investors, expressed as a percentage of their financial assets, from 1989 to 2026.
The vertical axis represents the percentage of financial assets invested in equities, ranging from approximately 35% to 85%.
The green line illustrates how this allocation has evolved over time. The yellow line indicates the historical average, around 62%, while the gray dashed lines represent a range of plus or minus one standard deviation.
Key trends observed
Equity allocation increased significantly during the 1990s, driven by the growing adoption of online brokerage platforms.
The allocation reached a peak of approximately 75% of financial assets in the late 1990s.
During the 2000s, equity exposure declined markedly and remained more volatile following the burst of the technology bubble.
The 2008–2009 financial crisis led to a sharp drop in equity allocation, bringing it close to its lowest levels.
Since the mid-2010s, equity exposure has rebounded and remained at elevated levels despite recent macro-financial shocks.
This behavioural regime seems to be fuelled by instant market access with mobile apps, a sense of invincibility boosted by recent returns, social media, influencers and the gamification of financial markets.
Chart 2 – Depressed about the economy but optimistic about stocks
Consumer confidence vs. optimism toward equities, U.S. (percentage expecting a market increase over the next 12 months)
Sources: DGAM, Conference Board, University of Michigan, LSEG, May 2026
Description of the chart Depressed about the economy but optimistic about stocks
This chart compares the evolution of U.S. consumer confidence with investors’ optimism toward the stock market.
The green line represents the proportion of respondents who expect the stock market to rise over the next 12 months. The blue line shows the Consumer Confidence Index, expressed as a z-score.
Key trends observed
In the late 1990s, consumer confidence and stock market optimism moved in the same direction, both reaching elevated levels during the technology bubble.
During periods of economic stress or slowdown, notably in the early 2000s and during the 2008–2009 financial crisis, both indicators declined significantly.
Since the mid-2010s, optimism toward equities has remained strong despite substantial fluctuations in consumer confidence.
The recent period shows a marked divergence: consumer confidence remains at a relatively low level, while stock market optimism has risen to elevated levels.
A study by JPMorgan Chase confirms that the democratization of the financial markets has soared to new heights.
Chart 3 – Retail investment increased 250% from 2015 to 2025
Monthly share of people investing and average investment amount
Note: Plot shows the share of the chequing account sample making transfers to investment accounts and the average amount transferred. Investors are those who made net transfers of more than 2.5% of monthly spending to investment accounts. The average investment amount includes zeros across all individuals not investing.
Source: JPMorgan Chase Institute, August 2025
Description of the chart Retail investment increased 250% from 2015 to 2025
This chart illustrates the evolution of retail investor activity between 2015 and 2025 using two measures: the proportion of individuals who invest and the average amount transferred into investment accounts.
The blue line represents the share of investors in the sample, while the green line shows the average amount invested, expressed in constant 2025 dollars. The chart therefore compares retail participation in financial markets with the magnitude of investment flows.
Key trends observed
From 2015 to 2019, both the proportion of individuals investing and the average amounts transferred increased gradually while remaining relatively stable.
Beginning in 2020, both measures experienced rapid growth and reached a pronounced peak in 2021, a period associated with a significant surge in retail investor activity.
In 2022, investment activity slowed but remained above the levels observed prior to the pandemic.
In 2024 and 2025, investment activity resumed its upward trend and reached new highs, particularly with respect to the average amount invested.
Overall, the chart highlights a substantial increase in retail investor participation and investment flows over the period, consistent with the notion of a broader democratization of financial markets.
The social aspect of the game
The sharp increase during the pandemic was due partly to a substitution effect, when sports betting wasn’t available and casinos were closed.
The exuberance subsided after the pandemic, as things got back to normal but quickly resumed in 2024 and 2025. This time it was the AI theme, meme stocks hyped by influencers, gold, cryptocurrencies and the momentum of many financial assets that stoked investors’ risk appetite and sense of invincibility.
Impact on financial assets
Bouts of stock market euphoria, especially when fuelled by the excesses of retail investors, sorely try the investment processes of professional managers. Increased involvement by small investors has a massive impact that can push the prices of some assets far beyond their fundamental value. In contrast, a manager’s mandate is grounded in disciplined management principles, fundamental analysis, diversification and risk management—approaches that are robust over a long period but poorly adapted to today’s behavioural regime.
Is it different this time?
Has the increased importance of retail equity investors truly and definitively changed the investment world? The history of economic thought suggests otherwise. In 1776, Adam Smith described the excesses of overtrading with the entry of new players attracted by high profits. A century earlier, Joseph de la Vega made the same comment about speculators on the Amsterdam Stock Exchange. In 1936, Keynes showed how collective psychology can lead to speculative dynamics detached from fundamentals.
In the 1960s, the “cult of equity” helped change the public’s perception of risk, setting the stage for the soaring valuations of the Nifty Fifty in the early 1970s. In 2000, Robert J. Shiller wrote, “News of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, … bringing in a larger and larger class of investors.”
It's easy to conclude that today’s social media are amplifying this phenomenon. Influencers act as narrative vectors that accelerate the contagion effect on the markets via increased crowd behaviour, social approval of risk taking, and normalization of buy-the-dip strategies.
Conclusion and implications
The rise of retail investors is a classic symptom of late-market phases and has been amply documented for more than three centuries. What sets today’s episode apart isn’t the nature of the phenomenon, but rather the speed at which it spreads and the scale of the financial flows it generates. Mobile apps, social media and influencers haven’t changed the nature of cycles, but they have accelerated the pace. It remains to be seen whether the acceleration will make cycles more persistent or simply faster.
As we await the answer, we think more vigilant monitoring of investor sentiment is called for. A change in retail investors’ mood or risk perception could have a major impact at a time when their equity exposure as a proportion of total assets is at all-time highs in the United States. History suggests that retail investors enter the stock market in a gradual, fragmented fashion but tend to exit in a synchronized, reactive way.
Chart 4 – Never before have U.S. households been so exposed to equities
Household holding of equities – United States (as a percentage of total assets)
Sources: DGAM, Federal Reserve, May 2026
Description of the chart Never before have U.S. households been so exposed to equities
The green line illustrates how equity exposure has fluctuated significantly over time, reflecting major market cycles. The chart also highlights the peak reached around 2000 during the technology bubble, which serves as a benchmark for comparison with the current period.
Key trends observed
During the 1960s, the share of household assets invested in equities remained relatively high before declining sharply throughout the 1970s.
Beginning in the 1980s, equity exposure gradually increased and then accelerated significantly during the 1990s.
A major peak was reached around 2000, followed by a pronounced decline after the bursting of the technology bubble.
Following the 2008–2009 financial crisis, the share of assets invested in equities resumed a sustained upward trend.
The recent period is characterized by record-high equity exposure, surpassing the levels observed at the 2000 peak.
Jean-Pierre Couture
Senior Portfolio Manager and Economist
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