‘Dumb money’ no longer: Wall street can’t ignore growing impact of retail investors

Core Insights - Retail investors are increasingly influencing Wall Street, moving away from the perception of being "dumb money" as they have outperformed major index funds like SPY and QQQ [1] - In 2025, retail investors accounted for $5.4 trillion in trading activity, marking a 47% increase from the previous year, the highest level since at least 2014 [1] - The rise of mobile trading apps, zero-commission trading, and social media investment communities has led to a surge in DIY trading among retail investors [1] Retail Investor Trends - The COVID-19 pandemic acted as a catalyst for a new generation of retail investors, many of whom engaged in the "meme stock" phenomenon [1] - By early last year, the movement of funds from checking to investment accounts reached its highest levels since 2021, with a 50% increase in individual investor market entry from 2023 to early 2025 [1] - Retail investors have been particularly active in buying stocks during market dips, with significant purchases noted during downturns [1][2] Investment Strategies - Retail investors are diversifying their portfolios, with options trading accounting for approximately $650 billion of their trading activity last year, showing a steady increase since 2019 [2] - Many retail investors balance high-risk trades with long-term investments, with some allocating significant portions of their portfolios to established index funds like the SPDR S&P 500 ETF Trust [2] - The strategy of "buying the dip" has proven profitable for many, although it has led to some making trades without fully considering associated risks [2]