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5 trends that shaped the world of retail investing in 2020

Prashant Mohan  |  01 Jan 2021Text size  Decrease  Increase  |  
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  • Retail investing certainly took off in a big way.
  • Cloud computing in particular, and WFH enablers were ubiquitous.
  • I learned a new term in investing - SPACs.
  • Your Crypto trading brother-in-law is back with his stories of soaring Bitcoin prices.
  • Tech stocks absolutely rocketed up.

As an Investor and a Marketer to Investors, the year 2020 was a year of change, acceleration, and as one commentator put it, acceleration of the acceleration, in the world of retail investing.

1.The Robinhood phenomenon: A record number of new investors poured money into the markets after the bottom in March 2020. Robinhooders - a term that was loosely meant to tie up all newbie retail investors. While many apparently propped up bankrupt companies, our own data at Sharesight suggested they were just picking up sensible blue chips and ETFs. Maybe a survivorship bias here - people who use Sharesight are more sophisticated than the average punter.

As written in the Australian Financial Review, August 2020:

"Sharesight chief executive Doug Morris attributed the contrast to a cultural preference among younger traders to invest in stocks they are "familiar with personally" and match their values.

Although the big four banks and Telstra were among the top 10 holdings for new investors, none of the energy or fossil fuel stocks formed part of their portfolios, reflecting the environmental and social governance (ESG) issues deemed a high priority among Millennials.

"The same rang true of Australian investor holdings in US equities, which included GoPro Inc, the "action camera" manufacturer. It is "not that large by market capitalisation, but highly consumed by Millennials," Mr Morris said."

Top 10 holdings of Sharesight investors

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2. Cloud technologies and companies: From the time lockdowns began, there were companies for whom work and professional life continued as usual, uninterrupted, but online. Zoom calls were ubiquitous, forced Google to improve its hangouts product, Slack changed its headline to "Your New HQ", and Microsoft teams took off a meeting platform. But, the "Cloud" had truly arrived. Of course, those older companies had to school themselves on the cloud, pretty quickly. An ETF that tracks all Cloud-based SaaS businesses is up 85.50 per cent in this calendar year. A hypothetical $10,000 investment in the ETF would be worth $18,607 as of writing this article.

MORE ON THIS TOPIC: How covid changed consumer behaviour and company valuations

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3. SPACs: If I'd mentioned the word SPAC last year, most of you would've stared blankly at me. But now, we have so many examples of SPACs and SPAC celebrities such as Bill Ackman. Many retail investors have participated in SPACs themselves. EV technologies, in particular, have been beneficiaries of this method of capital raising.

I visualised the performance of a popular SPAC, Virgin Galactic below. A hypothetical $10,000 investment in Virgin Galactic on 1 Jan 2020, would be worth $22,000 at the time of writing this article.

MORE ON THIS TOPIC: Blank-check companies: be careful

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4. Crypto is back: That brother-in-law who says he trades in Bitcoins and is worth a lot of wealth is back. After reaching some troughs in the past years, Cryptocurrencies are back as a genuine alternate asset class. Bitcoin gained 220 per cent in the calendar year 2020.

MORE ON THIS TOPIC: Evaluating the investment value of cryptocurrency

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5. Tech stocks had a rocking year: This doesn't need any particular charts to visualise. Technology became more ubiquitous than ever before in the year. Applications of technology - like in Telemedicine, work from home technologies, eCommerce, food delivery apps, streaming services such as Netflix and Disney - the list could go on. This was the acceleration of the acceleration. Telemedicine, for example, accelerated a good 5-10 years in 2020, and is hopefully here to stay.

As the year draws to an end, there's a lot to reflect on. Along with the positive stories I have covered, there were a lot of sectors negatively impacted - tourism, travel, airlines, event management, sports, and all of these sectors have a multiplier effect when it comes to serving societal needs.

As retail investors, there's never been a more important time in history to be aware of the macro trends shaping our world.

is the chief marketing officer at Sharesight

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