EXCLUSIVE: Bear Market Trends Are Transforming 'Day Traders Into Long-Term Investors'

Not all retail investors are created equally, and those who do their homework are outperforming their less well-informed rivals, according to operators of trading platforms.

The landscape of retail trading appears to be changing, according to the experts on the “Strategies for Encouraging Financial Literacy and Behavior Change” panel of Benzinga’s Fintech Deal Day And Awards event on Monday.

“We’re trying to change the landscape by taking retail investors and turning them from day traders into long-term investors,” said Anthony Denier, CEO of trading platform Webull.

And it appears to be working, as other members of the panel noted an increase in their members who are investing for the longer-term, rather than attempting to day-trade their way to riches.

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Stephanie Guild, CFA at Robinhood Markets HOOD, said: “There’s nothing like a bear market to turn traders into investors,” indicating that recent market conditions, prompted by rising inflation and higher interest rates, had discouraged short-term strategies in favor of holding onto quality stocks.

“The long-term investors are not trading any differently to how Warren Buffett would – they’re investing in what they know and what they believe will provide growth for the long term.”

Key to this change has been increasing efforts by operators of trading platforms to encourage their members to become more financially literate.

Providing key tools to investors is a regulatory requirement in many countries, but trading platforms must go beyond this if lasting change is to be accomplished. Services such as proprietary learning material and video content are showing retail investors how the professionals do it.

Cynthia Kleinbaum at MoneyLion ML is even bringing professionals onto the platform to show how they invest in real time – their portfolios open for all clients to see.

“We’re bringing the investment community together, so they can talk to each other and learn from each other,” she said.

The impact has seen a measurable increase in longer-term investment, to the extent that some are marketing retirement plans.

BlackRock Inc BLK has partnered with several platforms to offer trading strategies and educational material to investors. Kyle Braden, business development director, said: “We’re looking to the long term – providing information that can carry the investment decisions of non-professional investors into retirement.”

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Photo: Pratya Jankong