Are you considering entering the world of investing alongside your regular career? If so, that means you might become what’s called a retail investor.
You’ll monitor market trends and buy and sell stocks, options and funds, often with just a few clicks on a computer or smartphone. It’s become an increasingly accessible and popular pastime in recent years, with 33% of Brits owning stocks and shares, and 67% planning to buy them in the future.
The rise of retail investing can be put down to a number of factors, from the introduction of easy-access online trading platforms, to growing interest in cryptocurrencies and ‘meme’ stocks. Pandemic conditions also drove people to look for ways to boost their finances as they stayed indoors with reduced work opportunities and extra spare time on their hands.
All that said, investing remains a risky pursuit and something you shouldn’t take up without careful research and planning. Get a feel of whether it’s a good option for you by reading a summary of the main pros and cons below.
Pros of being a retail investor
Accessibility
Investing used to be reserved for professionals and the ultra-wealthy, but modern retail investing is a world apart. Instead of filling out complex forms or waiting for appointments, you can sign up in minutes online and start investing in your favourite markets, industries or businesses right away.
Low entry costs
It’s now a misconception that you need large amounts of discretionary income to invest. While real estate or even art might be over your budget, retail investing allows you to put down small chunks of change and still build healthy returns over time. Many platforms come with fees – but it doesn’t cost much to get started.
Flexibility
Part of the problem with other types of investments is the difficulty of accessing your cash if you need it immediately. But retail investing allows you to buy and liquidate stocks as you see fit, giving you greater access and control of your money than you might get with property or restricted savings accounts.
Cons of being a retail investor
Fees
As briefly mentioned above, most investment platforms charge fees. While mostly small, these fees can add up when they’re charged on every single trade you make. They’re often higher than those paid by professional investors who make larger purchases too. If your platform of choice claims to offer no-fee trading, they might be hiding these charges in subpar pricing.
No guidance
The freedom and ease of retail investing can be something of a double-edged sword. In fact, if you lack robust investment expertise and are prone to taking risks, a lack of guidance could be disastrous. Acting on short-term hunches rather than long-term strategy rarely pays off. On the other hand, if you’re too risk-averse, you could leave your money languishing in underperforming investments.
Thankfully there are many free resources available online to help teach you the ropes. It’s wise to build up a solid foundation of investing knowledge before you make any significant moves.
Now you have a better understanding of the risks and rewards of retail investing, will you follow the crowd?
