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.
