Booming Online Brokerage Accounts?
Another Week of Pandemic Madness
Online brokers have experience a record number of account growth
TD Ameritrade had 608,000 accounts opened in its most recent fiscal quarter
E-Trade gained 363,000 accounts in the quarter
Schwab saw 609,000 new brokerage accounts opened this quarter as well
Who is Opening Accounts?
Stock market participants can be divided into two main categories
1) institutional investors— money managers, mutual funds, endowments, insurance companies, family offices, etc
2) retail traders— moms & dads, teenagers, college students, individual traders, etc
90% of E-Trade's new accounts came from retail traders and Schwab also reported that a majority of its new additions came from individuals opening accounts
Is is evident that recent market volatility has come in part by a flood of new retail investors
My Take on Why This is Happening?
Many people are assuming the stock market will rise as fast as it fell (and it has so far— though we are still in the early stages of this global health crisis) and are aiming to cash in on seemingly cheap stocks
With not much to do at home, more people have the time to open accounts and trade
According to the Financial Times, 73% of Americans have had their incomes affected by COVID-19 and many may be looking for news ways to make some side money
With no casinos open and very few sporting events to bet on, I have no doubt that many are quenching their thirst of gambling via stock trading
The Bottom Line
In my opinion, as retail traders induce volatility and account for more and more trades due to the aforementioned factors, market prices become less credible