25PHOTO ILLUSTRATION BY 731. GETTY IMAGES (5); ALAMY (1). * AS MEASURED BY GOLDMAN SACHS’S BASKET OF THE MOST POPULAR U.S.-LISTED
STOCKS
TRADEDONRETAILBROKERAGEPLATFORMS.DATA:GOLDMANSACHS,BLOOMBERGsince the bottom on March 23 of the quickest fall
into a bear market ever, and $11 trillion in equity
value has since been added. Still, the suits see it end-
ing in tears. “You get in, you open up a Robinhood
account, make a few successful trades, and you ride
the trends,” says Giorgio Caputo, senior fund man-
ager at J O Hambro Capital Management. “The risk
is that someone might get lucky, and unfortunately
they may put too much emphasis on what ultimately
was a lucky outcome.”
At least 8 million new accounts have been opened
in 2020 across brokerages including Charles Schwab,
E*Trade Financial, TD Ameritrade Holding, and
Robinhood Markets, all of which permit some ver-
sion of free trading. Altogether, retail traders now
make up a fifth of equity trading volume, second
only to behind-the-scenes middlemen such as mar-
ket makers and high-frequency traders, according to
Larry Tabb, Bloomberg Intelligence’s head of mar-
ket structure research.
Ayden McCloskey, 22, says he learned on the
fly. A construction worker and delivery driver for
DoorDash Inc. in Minnesota, he says he lost $20,000
shortly after he started day trading in March, in
part because of bets he made on the market going
lower. “I fought the Fed for too long,” he says. “That
was something, as a newbie, that I shouldn’t have
done.” So he changed course and made it all back.
He says this agility makes investing fun in a way
it can never be for a Wall Street veteran. “It really
is my life,” he says. The pros “burn out because
of the pressure.”
The pros, for their part, are skeptical. As of now,
says Dan Egan, managing director of behavioral financeand investing for robo-adviser Betterment LLC, the
retail hot streak hasn’t lasted long enough to say
anything definitive about it. “It’s been an easy mar-
ket to think that you’re a genius in,” he says. “It will
be interesting to see if those people who have been
playing a very simple version of the stock market
game, if they are going to say, ‘Oh, I just got lucky
that I was in during a period when these things were
going on,’ vs., ‘I actually have some ability to play
the market in all environments.’ ”
Quantitatively speaking, a good summer comes
nowhere near proving anyone has investing skill.
In a 2017 paper titled What’s Past is NOT Prologue by
James White, Jeff Rosenbluth, and Victor Haghani
of Elm Partners Management, the trio suggest that
even two decades of performance isn’t enough to
fully distinguish whether a fund manager is anything
other than average.
Still, give credit where it’s due, says Julian
Emanuel, chief equity and derivatives strategist at
BTIG. Retail investors rode the waves for months.
While Wall Street counseled prudence, some of
the stock market’s highest fliers went on to gain on
average an additional 20%. Tesla Inc. surged 80%
in August, to as high as $498 a share, adding to
what was already a 240% year-to-date gain. Shares
of Zoom Video Communications Inc. doubled, to
$458 a share, in roughly the same time period. Apple
Inc. added $400 billion, or 26%, to its market value.
“The public can be credited for outperforming the
markets simply because there was what we would
call a suspension of disbelief and a willingness to
stick with the trend,” Emanuel says. “We wouldn’t
call that luck. In certain environments, that’s aFINANCE BloombergBBusinessweek November 23 , 2020Changein indexsince
Dec. 31
Stockspopularwith
retailtraders*
S&P 500
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