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How the pandemic fuelled the rise of retail investors

How the pandemic fuelled the rise of retail investors

At a global level, one of the outcomes of the coronavirus pandemic has been a renewed focus on securing one’s own financial future. Here in the Gulf, business owners – particularly those in sectors such as restaurants, hospitality and travel, which rely heavily on the physical presence of their customers – suffered substantial revenue losses,

At a global level, one of the outcomes of the coronavirus pandemic has been a renewed focus on securing one’s own financial future.

Here in the Gulf, business owners – particularly those in sectors such as restaurants, hospitality and travel, which rely heavily on the physical presence of their customers – suffered substantial revenue losses, first due to extended periods of lockdown, then by social distancing requirements and mobility restrictions.

These effects trickled down to salaried employees, who had to endure pay cuts as well as redundancy as a consequence.

How coronavirus changed the investment scene

As the pandemic altered the investment landscape and diversification has become a priority among investors, environmental, social, and governance (ESG) and the increasing demand for technology are fuelling investments in the region

The ensuing period of economic instability, which endures for many, has led to an explosion in trading and investment interest as people seek to diversify their income streams. “We have certainly seen an increased appetite for individuals to take control of their financial future amidst all the uncertainties of the pandemic,” says Lex Webster, co-CEO of Exinity Group.

While Exinity is a relatively young brand, the team behind it has more than 20 years’ experience in online trading – eons, in the context of internet businesses. The group builds products and services targeting the new generation of investors in a post-pandemic world.

Investors: the new, digital generation

One of the key changes brought by the pandemic, says Webster, is in the attitudes of younger people towards the future. “It is often said that the younger generation doesn’t plan for their financial future but I think we have seen a shift during the pandemic. Individuals are becoming increasingly aware of the need to protect their financial future and think about wealth creation beyond employment opportunities.

“We are seeing a huge appetite from those new to investing and trading to build the knowledge and skills needed to succeed.”

Lex Webster, co-CEO of Exinity Group.

Feeding that appetite, he adds, was the primary reason why Exinity built its wealth engine.

Earlier this year, stories about video game retail chain Gamestop and cinema group AMC jumped from the business section into mainstream headlines following targeted social media campaigns – many led by millennials and zoomers on Reddit and Twitter – aimed at driving up their share prices through encouraging masses of retail investors to buy. In the process, terms such as ‘hodl’ (a play on ‘hold’) and ‘diamond hands’ (referring to an investor keeping faith with a stock despite its price coming down) came to the fore, as did the prominence of platforms such as Robinhood and e-toro.

“The most interesting thing this trend shows us in terms of retail investors is just how much people are looking for ways to take control of their financial future,” says Webster. “It also emphasises the need for providers and partners to talk clearly about the opportunities and risks in the market. While some investors undoubtedly made money on stocks such as Gamestop, many will not have done so.

“In many ways, what we have seen with the likes of Gamestop and AMC is just another variation on the trend that has been ongoing for the past 20 years – and more. By this I mean that there have always been spikes of interest in a particular stock, driven by all sorts of factors. But today, the speed and reach of social media can accelerate these trends and create new opportunities.”

How to add real value in an ever-changing world is likely to remain relevant for many investors.

While he’s not certain whether the peak levels of retail investing seen during the depths of the pandemic will be maintained, Webster is sure that many of these investors will remain engaged as they see the benefits of investing their wealth, especially in the low-interest environment.

Appetite for risk

For Webster, the Gamestop/AMC scenario is a great illustration of why Exinity is committed to explaining the risks and rewards of trading.

“You need to understand the risk you take when following these trends and the tactics available to you to protect your investments from adverse market fluctuations,” he says.

While risk education is an important part of Exinity’s mission, the brand’s theme, ‘Love Risk. Live Reward’, embodies a philosophy of embracing risk to reap its benefits. “What we see is that clients want to embrace risk to varying degrees in order to reap the rewards. This is particularly true when it comes to the younger generation, which typically has a higher tolerance for risk as they seek to build their wealth,” he adds.

Exinity Group’s offices in Limassol, Cyprus. The company has a wealth of experience in trading and investment services.

A long-term legacy of the pandemic, Webster hopes, will be that current and future generations are far more engaged with financial markets than their predecessors, with a greater understanding of the need to manage their own financial future and the ability to take advantage of services that support that goal.

Exinity’s stated mission is to help clients unlock the value of risk-based driven investing. “We believe the way to do this is to combine longer-term investments with short-term trading opportunities that offer the chance to generate returns across a broad range of financial markets,” says Webster.

The company provides access to a range of markets/asset classes such as equities, indices, gold and currencies, and has also developed content, coaching and tools that provides users with the right information in digestible formats, to make informed decisions and understand the risks and rewards.

“Pre-pandemic research has shown that millennials are often risk averse, but post-pandemic we are seeing a much greater openness to new forms of risk taking in the financial world,” he adds. “There is an increased appetite for investing in equities, particularly technology stocks, as well as an appetite for new instruments such as NFTs.”

The financial technology space has been very active for several years and the future remains very promising for this field.

Indeed, with people spending an unprecedented amount of time at home over the past 18 months, technology has played a key role influencing investor interest over the course of the pandemic.

“There are two key aspects to this: clearly the digitisation journey for many businesses accelerated during the pandemic and this has been reflected in the stock performance of some of the big tech companies riding that wave, particularly US equities such as Microsoft and Google,” says Webster.

“I think it’s also worth highlighting that this digitisation process applies to what investors want and expect from their investment platform. Indeed, in the UAE, this trend was identified in a study by the CFA Institute last year, which found 79 percent of respondents in the UAE wanting digital investment solutions.”

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