It’s not investing that is viewed skeptically, it’s the system.
More than half (56%) of people who have money in stocks think the market is rigged against individual investors, according to a survey from Bankrate. That’s compared to 41% of non-investors who say the same thing.
“Part of it may have to do with expectations,” said Greg McBride, chief financial analyst at Bankrate. “Newer investors may be trying to score big gains or time the market and the odds are not for long-term success with those endeavors.”
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At the same time, he said, retail investors have seen hedge funds and other sophisticated or wealthy investors treated differently, such as getting early access to initial public offerings and better trade execution.
“Newer investors are seeing those things, and that can sow the seeds of doubt about the integrity or fairness of the markets,” McBride said.
The poll of 2,525 U.S. adults was taken in late February, about a month after a runup in so-called meme stocks, including Gamestop — whose share price peaked at $347 on Jan. 27 after trading at about $31 two weeks earlier. The surge was attributed to an army of Reddit investors forcing hedge funds that were banking on the stock dropping — known as short-selling — to instead buy shares at a higher price.
Amid the frenzy, Robinhood, the popular trading application used by individual investors, restricted trades in Gamestop and some other stocks. The company was accused by its users and lawmakers of protecting hedge funds that were short sellers of those stocks. Robinhood said the move was made to meet regulatory requirements applying to financial reserves, not to benefit any particular group of investors.
The Bankrate survey also explored how individuals are investing now versus before the pandemic.
“What we saw was that Reddit users were two times more likely to be investing more rather than less, compared to before the pandemic,” McBride said.
Source: Business - cnbc.com
