Retail Traders Lose $350 Billion in Brutal Year for Taking Risks

Investment portfolios belonging to retail traders suffered a $350 billion blow this year as big bets on risky stocks and former high-fliers like Tesla Inc. backfired for the mom-and-pop set.

The average active amateur investor’s portfolio is down about 30% in 2022, according to data compiled by Vanda Research, which studies self-directed retail traders globally. By contrast, the S&P 500 Index has lost 17%.

Of course, this group isn’t about the boring S&P 500. It tends to be concentrated in high-profile stocks like Elon Musk’s electric-vehicle company, which wiped out about $78 billion for retail traders alone as its shares plunged, according to Vanda.

Individual investors have had an outsize influence on the market since the start of pandemic lockdowns, when cooped-up 20- and 30-somethings flocked to no-cost trading to relieve boredom and make an easy buck buying almost any stock during a bull-market boom. Now, as equities head toward their worst year since the 2008 financial crisis, retail traders have suffered even sharper drops and their share of US equity market volume has slipped since the start of 2021.

“The losses this year were unprecedented, especially for the younger generation of investors,” said Giacomo Pierantoni, the head of data at Vanda in Singapore. Whether they keep plowing money into the market — buying the dip, as they say — or lose faith in investing and give up altogether could help determine their ability to retire in the coming decades.

Another sharp selloff for Tesla, which accounts for about 10% of the average self-directed global retail trader’s portfolio, or Apple Inc. could determine sentiment, according to Pierantoni.