The Rise Of Retail Investors Creates Investing Opportunities

Retail trading now accounts for almost as much volume as hedge and mutual funds combined. The dramatic increase in the influence of retail investors over the past decade is due to the recent sharp increase in their numbers combined with a longer-term decline in trading activity by hedge and mutual funds.

This change in volume composition may be long-term and would restore retail trading to the level of importance it enjoyed prior to the 1970s. Strong retail participation suggests that we can expect increased volatility, and decreased market efficiency, in the years ahead.

Such an environment should present very attractive opportunities for sophisticated active investors.

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