Why US Online Investors Are Trading Less but Earning More

<p>A recent
report by Investment Trends revealed a decline in online investor
activity in the United States for the second consecutive year. The 2023 US Online
Investing Report showed that 11.4 million American adults engaged in online
stock or ETF trading over the past year, down from 13.3 million in 2022.
Despite this downturn, more than half of active online traders have seen their
investments perform better than the previous year.</p><p>US Investor Activity
Declines Visibly</p><p>The report
delves into the complete spectrum of self-investing, from long-term "buy and
hold" investors to frequent traders. It found that the decline in online
investor numbers aligns with softer client inflows and a surge in dormant
accounts. Notably, 30% of US online investors ceased trading in the past year.
This coincides with other regions where investor activity declined as much
as 40%.</p><p>Lorenzo
Vignati, the Associate Research Director at <a href="https://www.financemagnates.com/tag/investment-trends/" target="_blank" rel="follow">Investment Trends</a>, observed that
the US online investor market decline has become a longer-term trend. "For
two consecutive years, this market has witnessed a rise in investors suspending
their trading activities, accompanied by a slowdown in the influx of new
investors entering the market," Vignati commented.</p><p>These
findings align with another report published by Investment Trends a few
months ago. Finance Magnates reported at the time that there has been a
decline in the number of retail investors in various major financial centers
since the beginning of 2022. <a href="https://www.financemagnates.com/forex/175000-retail-traders-traded-forex-in-the-us-in-q2-2022/" target="_blank" rel="follow">In addition to the US</a>, this included the UK,
France, Germany, Singapore, and Australia. The exception turned out to be the
United Arab Emirates (UAE), which achieved a record number of traders in the
leveraged market, <a href="https://www.financemagnates.com/forex/uaes-fx-and-cfds-trader-population-reaches-record-49000-in-2023/" target="_blank" rel="follow">totaling 49,000</a>.</p><p>Positive Trends amidst the
Decline</p><p>Despite the
overall decline, the report found a silver lining to the situation. Over half (51%) of
active online investors reported better investment outcomes in 2023 compared to
the previous year. Additionally, a bullish sentiment prevails among online
investors regarding the S&amp;P 500, with 63% expecting it to rise in the
coming year.</p><blockquote><p lang="en" dir="ltr">Investment Trends has released its latest 2023 US Online Investing Report <a href="https://t.co/HOAS3kV94g">pic.twitter.com/HOAS3kV94g</a></p>— Damian Chmiel (@ChmielDk) <a href="https://twitter.com/ChmielDk/status/1711655809585717418?ref_src=twsrc%5Etfw">October 10, 2023</a></blockquote><p>The report
also highlighted shifts in the demographics of new online investors. While the
current cohort remains predominantly younger, they are significantly wealthier
than any group observed during the pandemic. </p><p>Vignati
noted that the key driver for these new entrants was the need to manage
retirement savings and a desire to learn new skills. "This sends a clear
signal to platforms in this space to continue supporting all their customers
with the tools, information and education to ensure they remain as active
investors," he added.</p><p>The Growing Need for
Financial Guidance</p><p>The study
found that one in two online investors prefers to consult a human financial
advisor for investment decisions, and there's been a slight boost in the use
of financial advisors among online investors, from 25% in 2022 to 28% in 2023.
Vignati concluded that more than 80% of online investors still have unmet needs for advice, emphasizing the requirement for human and digital advisors in this space.</p><p>Artificial
intelligence is partially beginning to meet this need. <a href="https://www.financemagnates.com/forex/three-out-of-four-traders-consider-chatgpt-a-trusted-source-for-financial-advice/" target="_blank" rel="follow">As shown by the Investor
Index study</a>, 73% of investors in the United Kingdom would be willing to
trust ChatGPT for financial advice in the coming years.</p><p>"Once
more, this presents an opportunity for platforms to create a distinctive
proposition with tailored content that caters to the entire investor base,"
the Associate Research Director at Investment Trends commented.</p><p>Another
recent report by Vignati's company analyzed the UK market and showed that <a href="https://www.financemagnates.com/forex/almost-50-of-the-uk-traders-feel-inflation-blues-and-seek-cheaper-solutions/" target="_blank" rel="follow">almost
50% of the local traders</a> feel the inflation blues and seek cheaper investment
and saving solutions.</p>

This article was written by Damian Chmiel at www.financemagnates.com.