Throughout the course of human history, people have sought the answer to one burning question.
Is it worth all the hype?
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We’ve all been down that road. Someone is always pushing something at us and promising that this is it, no kidding, whatever it is will be the best thing that ever happened.
And we get revved up, expecting all manner of good things to happen, only to be severely disappointed and asking, “dude, seriously?”
Retail investors — people who invest their own money — can be influenced by all kinds of hype, which is often driven by social media and online communities.
And they’ve been busy in the first half, cumulatively buying around $3.4 trillion of equities, Morningstar reported, citing data from Nasdaq.
At the same time, they sold about $3.2 trillion — bringing the total traded to more than $6.6 trillion.
Smaller investors ‘a major force’: Vanda Research
“Retail investors remain a major force in the market,” Marco Iachini, Vanda Research’s senior vice president of research, said in a note to investors.
SoFi CEO Anthony Noto says the fintech is expanding alternative investment opportunities for a new generation of investors, Photo: Christopher Goodney/Bloomberg via Getty Images
“Participation is at record highs, the dip-buying bias is fully intact, and engagement with single names — particularly high-beta and leveraged plays — continues to rise.”
“Performance is holding up and risk appetite is anything but shy,” he added. “Nothing seems to stop this retail train.”
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And the average retail investor is getting younger, according to the World Economic Forum’s Global Retail Investor Outlook 2024.
Released in March and spanning 13 economies, the study found that 30% of Gen Zers start investing in early adulthood, compared with 9% of Gen X and 6% of Baby Boomers.
By the time they enter the workforce, 86% of Gen Zers have learned about personal investing versus 47% of Boomers, underscoring a generational transformation in financial habits, the report said.
SoFi CEO cites new generation of investors
SoFi Technologies (SOFI) caused some excitement recently.
The shares soared on July 8 after the fintech said it was adding new private-market funds, offering exposure to startups like OpenAI, the company behind ChatGPT, and Elon Musk’s rocket company, SpaceX.
“SoFi is expanding alternative investment opportunities for a new generation of investors,” Anthony Noto, CEO of SoFi, said in a statement.
The company has expanded access to alternative investments to include new private markets funds from asset managers including Cashmere, Fundrise and Liberty Street Advisors.
Over the past year, SoFi said, it has expanded its alternatives offerings by introducing a suite of alternative-investment funds managed by Ark, KKR (KKR) , Carlyle (CG) and Franklin Templeton that provide exposure to private credit, real estate, and pre-IPO companies.
TheStreet Pro’s Ponsi has questions on SoFi move
The company also partnered with Templum to give members access to privately held companies via Cosmos Fund — with asset classes offering exposure to tech companies like Musk’s xAI and Databricks, a data, analytics, and AI company — as well as Pomona Investment Fund and StepStone Private Markets Fund.
With investment minimums starting at $10, SoFi says, it is “leveling the financial playing field” and offering a wide range of institutional-grade investment opportunities to more than 10.9 million members.
Related: Veteran trader turns heads with SoFi price target update
Shares of SoFi, which is scheduled to report quarterly results on July 29, are up about 31% this year and up a vertigo-inducing 216% from this time in 2024.
On July 8 Barclays raised its price target on SoFi to $18 from $12 and affirmed an equal-weight rating on the shares as part of a Q2 earnings preview for the consumer finance sector.
Card-delinquency trends improved through May, which should help reduce net charge-offs, the investment firm said, according to The Fly.
But Barclays said most stocks in the group are trading above historical valuation averages, which sets a high bar for outperformance in Q2.
TheStreet Pro contributor Ed Ponsi has picked up on the SoFi buzz and has just one question: Is the excitement justified?
Ponsi, managing director of Barchetta Capital Management, profiled SoFi last month with a buy recommendation following a three-month high for the San Francisco company.
“Frankly, I’m skeptical about the level of participation one can gain via this method,” he said in a recent column. “I’m not trying to throw cold water on SoFi, but I do think retail investors should manage their expectations.”
He also said that with the market at or near all-time highs and with seemingly no end to the rally in sight, “managing expectations isn’t exactly the strong suit of the average retail investor.
“Perhaps I’m jaded, but I get the feeling that someone with $10 who is dreaming of a windfall in SpaceX or OpenAI is about to be disappointed,” he said. “This promotion seems to be more hype than substance.”
Nevertheless, Ponsi said the promotion is likely to attract investors.
“Novice retail investors will be drawn in, as they might not appreciate the difference between outright ownership and indirect participation,” he said.
Buying shares in a fund that in turn invests in private companies gives investors only indirect influence over those companies’ operations, not the direct voice that comes with votes in publicly traded companies.
“Such nuances are likely to be lost in the excitement of participating in something that is seemingly unattainable,” Ponsi wr
Related: Fund-management veteran skips emotion in investment strategy