Retail investors made 35% more profit than hedge funds in 2020

New data shows that retail investors are making more money than hedge funds. We take a look at what’s going on and how to get involved in this movement.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

It seems the tables may be turning in the world of investing. No longer are small retail investors being bullied by the big hedge funds. There’s been a lot of changes for individual investors over the last few years. It’s now easier and cheaper than ever and it looks like many people are beating the professionals.

New data from trading platform Stake shows some exciting truths. Read on to find out what they’ve learnt and how you can be a part of the financial revolution.

What were hedge fund returns in 2020?

Hedge funds have been hitting the news quite a lot recently. This has mostly been as the villains in the short squeeze saga involving GameStop.

Putting aside all emotions, the important thing to understand about hedge funds is that they’re all about making money. Not only is that their goal, but they’re very good at it.

Data obtained from HFM (hedge fund data and intelligence) shows that during 2020, the average return for hedge funds was 12.3%. By any standards this is more than respectable, especially considering this was during the coronavirus pandemic. However, these profits were dwarfed by the achievements of regular retail investors.

How much did regular investors make?

Lately, retail investors and hedge funds have been compared to David and Goliath. Where hedge funds are organised groups of professional investors, retail investors are people like me and you.

There’s been a huge surge in new investors this past year. What’s amazing about this is that many of these people have been successful with their investing. The data from Stake shows that, on average, retail investors made a whopping 47% profit last year!

Matthew Leibowitz, CEO of Stake explains: “While the recent volatility and market interest has contributed to our growth, it’s really just the tip of the iceberg of a deeper trend that has been fuelling rapid growth through 2020 and into 2021. More and more retail investors are recognising the incredible opportunity of the US market, one worth $37 trillion and home to some of the world’s largest and most exciting companies. So far this year, 75,000 customers across the globe signed up to Stake, and we have seen over 500,000 trades executed totalling over $800 million.”

How do I get involved in the investing movement?

If you want to become an investor, we have loads of resources available here at MyWalletHero, and over at The Motley Fool, that you can check out. After developing an understanding of the markets, you can begin creating your very own investing strategy.

Once you have a plan, the next step is finding an investing platform that suits your style. There’s no single best option out there. We’ve done a lot of research to help you out by putting together our top-rated share dealing accounts.

The one that fits you best will depend on your approach. However, for long-term investing it’s often best to select an account with low fees. Otherwise, these costs will eat into your returns. Setting up a stocks and shares ISA can also be a great move because this can shield your investments from tax obligations.

It’s really important to remember that there’s no guarantee you’ll make money when investing. This is especially so if you just start investing blindly, following absurd trading tips from sources like TikTok

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »