Why retail investing has taken off in the U.S. - but not Europe
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- Опубликовано: 12 янв 2022
- European retail investor participation has always been low relative to other advanced economies. Could that change?
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European retail investor participation has always been low relative to other advanced economies. The recent boom in American trading activity on platforms like Robinhood has made this discrepancy even more visible.
While Europe has seen retail investor participation double since 2020, Vanda Research found retail activity still makes up only 5-7 percent of total trading volume in Europe, compared to more than 25 percent in the U.S. and more than 60 percent in China.
Despite that, there is a slew of start-ups in Europe trying to take advantage of growing interest, including Revolut, Trading 212, Freetrade and Trade Republic.
Watch the video above to learn why retail investing has lagged in Europe, and whether a large pension gap, low interest rates and a raft of new online brokerages hitting the market could build enough momentum to change that.
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As a French, I must say that when in 2008 I wanted to own stocks for financials (buy the dip), the only alternative was to go through my bank and their fees were damn expensive, a total ripoff. Today, I see that some of my friendsv in France starting to be interested in the stock market. The main driver is that a lot of people in their 20s, 30s and 40s doubt that the state backed pension system will survive when it will be their turn to retire.
Did you try to shop around - banks dont have to offer the same rates (and if they get together to set the same rates they are probably breaking the law (they would here in Denmark) ?
And have you considered that maybe those "free" trades offered now might just be a lot less transperrant about the costs involved than the banks ? The providers of thosse apps certainly want to profit from you business so it WILL COST YOU SOMETHING. If they try to sell you something as free I think they are trying to mislead you.
I trade through my bank and it costs 0.5% to 1.5% depending on the market and the volume, there is a minmum fee and a maximum if I trade for less than 100.000 DKK - the value traded is set by the market. It cannot get more transperant than that. And the stock values usually change more than that in the very short term. I have a stock that has gone down 90% and another that has gone up 1200 % - why should I be bothered by 0.5% in either case ?
And what do you call a ripoff ? Here in Denmark many call it a ripoff that the banks have negative interest rates (you pay to have money in the bank) despite the fact that the banks have the same issue with the Danish central bank and are passing it on to their customers - is that a ripoff to you when the bank passes the cost of the money policy of the government on to the customers who voted for that government ?
I am from Germany and there has been a clear change in the past two years. Before COVID none of my friends or work colleagues was talking or owning stocks (often via etfs) but now i got the feeling that the majority of my generation at least thought about investing in companys. As a major reason i identified the lack of trust in the state age requirement (bc of demographic change) and negative interest rates on saving account deposits. I do not see an end to this development in the near future.
Remember kids, DRS your fucking shares, not financial advice
Its means we are fucking in bubbel
investing over here is so frustrating
@@lolaomotola8229 lookup Vivian Klaine Morgan, she will help you
I am surprised everyone here talking about same madam Vivian
I liked this video because it didn't feel like Americans were talking down on the current EU system, but rather talking about where it's going and the room for growth.
We buy ETFs here in Europe too. A lot of old people will never buy one but me and my 20-22 years old friends all buy etfs on Interactive Brokers. Investing in the Stock Market is taking off in Europe too !
Yeah I need to get onto interactive brokers but I currently use other brokers
Me buying NFTs
The worst thing: My company pension fund here in Switzerland made 1.0% returns in 2020, when markets were skyrocketing. I am in my twenties and would probably take a lot more risk the younger I am. Instead, I am tied to the company pension fund. Still no clue what they invested in...
1%? Dude that’s not even treasury bond returns, get tf out of there
Are you able to change your plan? In Australia we have ‘super’ funds which we can shop around or change between different levels of investment aggression/focus
Wow they are “loosing” returns big time that is unbelievable
@@grancanariaforvacations7303 Playing safely
you shouldn't be contributing to that pension plan. if it's only employer contributed then whats the loss? they weren't going to give you the money anyways
Retail = the type of investors who buy high and sell low
That’s just a false generalization.
I live in Europe, I'm 37 and I feel the change in the mentality. But exist a big gap in financial education for now. Hope that changes soon.
I live in the UK. I've found this to be decently profitable. Yet you tell people about it and they know next to nothing about it. People seem to think it's about luck or that the whole thing is a form of Gambling.
I lived in France for about a year, and had a bank account. I was so shocked to see that I don't get any text when I spend money or deposit money or that it took 2 days for my ledger to get updated in the app. I was used to getting text mssg everytime a tx happened in my bank acc.
European countries often have an antagonistic attitude to capital markets and regard them suspiciously. Most of the exchanges have a transaction tax that discourages trading and even investing in them at all. They can invest in the US of course but there are currency exchange and other barriers to that.
Two factors that were not mentioned here at all that play a big role IMO:
History/tradition & size.
Ironically, in the field of the stock market / investing, the US has a bigger "tradition" than the vast majority of European countries. That is not to say that modern finance was not largely invented in Europe (it was). But it is and was much more common to invest in the stock market in the US than in Europe; something that regular people could and would do, so a "family tradition" of sorts. By now, the young investors learned the ropes from their parents, whose parents in turn might have already started investing decades ago. There is a familiarity in the US that is not there in Europe except for a very small segment of the population. It doesn't help of course that in Europe the stock markets did not function at all or in a very restricted manner for long periods of time in many countries (former Communist countries until 1990, during WWII, WWI, and the various dictatorships - Spain, Portugal, Greece, Italy), whereas in the US the stock markets worked without interruption for much longer.
Secondly, again relating to familiarity - the size: people like to invest in what they know. In the US, there are hundreds, or rather thousands of companies to choose from in the stock markets. They speak the same language, work in the same currency, and have the same legal framework as the investors.
The stock markets of smaller European countries are tiny in comparison, often only a couple of dozen companies. Also, it's my impression that many more companies are privately owned as LLC, even some surprisingly big ones (I once tried to buy stocks of Robert Bosch - tough luck!). So you might not find a company that you'd like to invest in actually available for investments.
That's really solid analysis of the cultural factors. Thanks!!
Cause they're lame Socialists compared to the US.
They are much less individualistic than Americans.
Retail investing has always been pretty big in Sweden but I think it has increased even more recently. Young people are actively talking about their investments, probably due to the general hype surrounding the stock market.
If everyone and their dog is talking about investing then it’s time to get out NOW!
You need to make a video on how Zerodha does all this and still makes a lot of money in India.
True🇮🇳🇮🇳🇮🇳
We have covered Zerodha before! ruclips.net/video/acqUG4lCVO0/видео.html
The fact that this video started with tulips is either ironic or very well thought
What can we say? We love a bit of economic history.
Tulips don't mean anything in investing. ;)
@@FletcherFinance it does🙂
I invested in the European market which makes me about $3k monthly with the service of a coach under a great broker, that is the most effective way I have known
How so? I want to get into shares but have no idea how to start
@@ieshamensalva5135 just look up the name Benjamin ravies you should find his work portfolio
Same thing I am doing spreading for both long and short term gains
@@Arief351 thank you, I found his site and mailed him for assistance
In the UK we have a "Stocks & shares ISA", where we can contribute £20,000 PA for the purpose of chosing our own investments, gains on it are tax free. (forgot to mention dividends are also tax free). Over several decades this really adds up to a nice nest egg.
wow!
damned socialists !
Europeans are on average far more careful when it comes to investing, spending money.
Definitely, in a lot of Europe when your company goes bankrupt or you make a mistake and lose your money it's seen as "why did you do it?" and "you shouldn't have started in the first place", whereas in the US it is often seen as a learning experience, from which you will do better next time.
They will once they find out the state has squandered all their tax money to overpay golden retirement for boomers.Especially young.That and housing market is huge here.Housing market is the stock market here,with rent sky high everywhere
So are we just ignoring that one of the most successful startups in recent years in Europe are Fintechs like Trade Republic.
Retail investing has boomed in the last two years since Covid, it just has a much smaller starting point.
The guy they just interviewed was a co-founder of Trade Republic. And yes it is booming but relativly speaking it is still much smaller than in the U.S.
did you even watch the video?
We interviewed Trade Republic in this very video, so definitely not ignoring them and other start-ups.
A lot of US companies offer their services only to US citizens. For example, Robinhood does not operate in Europe. This may be an additional reason.
They actually scrapped their UK launch in 2020: www.cnbc.com/2020/07/21/robinhood-scraps-launch-of-its-investing-app-in-the-uk.html
@@CNBCi Another example is Trade Republic (some people call it the Robinhood of Europe) does not provide services in all EU countries! Despite the rapid growth of technology, many retail investors do not have access to the markets. Even if they have, they are limited on specific investing instruments (e.g. Revolut does not give access to ETFs). Overall, retail investors outside the US are somehow restricted.
What about Degiro or eToro?
There’s also interactive brokers
Why would they..EU should have their own apps.
Thank you for replying to some comments & questions.
You're very welcome.
Here is a simple explanation. In the US, our entire ""retirement" system is basically the stock market, .e.g. 401K, IRA, ROTH IRA, etc. If we don't invest in stocks, we, the younger generation, will die poor and uncared for when we get old - even if we had worked all our lives. The boomers will bankrupt the Social Security before they depart from this world. However, the Europeans do actually have a sensible pension system and they don't need the stock market to not die old and poor. That should explain why Americans are more inclined to trade in stocks than Europeans do.
and this "sensible pension system" in europe is about to explode in some countries, because there are no people to contribute to it because of low birth rate. I, as an European, would choose American pension system.
The uk pension are fucked
We do have free trading in the UK via companies such as Trading212, Freetrade etc etc. Retail trading i believe is picking up due to events such as the GME and AMC squeeze however that is a skewed perspective.
Have experienced a few markets in my life.
But one calls me the attention, the Brazilian stock market is well regulated, and a platform like robinhood would access direct the stock exchange. The fees would sit around 1 cent per stock negotiated
It depends so much on the country. Where I live, pensions and real estate are king. Anything else is taxed really high and this turns off a lot of people.
It's deeply unfortunate that at no time do you draw the distinction between retail-investing, and retail-trading.
This is such a great video!
When you pay 60% tax there’s not much extra to invest in
I’ve looked into it and I think Denmark has the highest Capital Gains Tax rate at 42%?
Problem are not the brokers but the taxes. 401ks, Roth IRAs and other accoubts have tax advantages, dividends have lower taxes, taxes on capital gains aren't ridiculously high. Also, if you invest in foreign companies you often pay taxes there as well. The European market doesn't have the same growth history so investing only there might not be the best decision.
Let people gamble their pension money, what can go wrong?!
Retail investors usually don't have access to select their pension investments and their non-pension retirement investments are limited and controlled by their employers. The app mentioned doesn't even offer retirement accounts.
@@neutralsportsfan17 In that case, there isn't a relation between »pension« and »Retail-Investor« .. that's what this piece started with.
The Difference is the US is a Lot More Relaxed With Stocks and People Are More Educated on Them in the US Too.
In Europe However it is All Tightly Regulated and People Are Not Educated on Them as Much.
Nice reference to tulips
Depends on where in Europe. In Sweden its big at least since 1999. I myself started online trading with Nordnet that year. But I know many Who where interested in the stockmarket before that.
"Trade more frequently and feel bad at the short term losses I lock in"
Fix it for him.
Time IN the market beats TIMING the market.
@@DragonKingGaav What about Time on the market
Just because you lose don't assume everyone does
That was a good video. There should be a follow up video if there are any changes in Europe in the future
How did you not mention DEGIRO? Otherwise, as an european, yeah, it's pretty much on point. The stock market is seen as for wealthy people who like to gamble with their money. The financial illiteracy is a big problem in Europe as a whole and as a result people are very conservative financially. But I think that is starting to change little by little with the new generation
Financial literacy in many EU countries is higher than in the US.
I thought binary options were banned in Europe for the most part and CFDs were the closest similar instrument. Options trading has been the big growth in the US retail trading sector coupled with reduced trading transaction costs due to the scaling of pay-for-order-flow models. More ways to gain/lose money in the US.
I am 18 and a LOT of kids around my age want to start investing or have started investing (I started investing at late 16)
Depends on the EU country. The Netherlands has retirement savings structure in a similar way to 401k.
Video is half true. The US has pensions called social security but 401ks are contributions defined and employers will sometime offer a 401k match if you work full time.
Not true, Dutch pesionfunds are not individual accounts, like the 401k. Your employer puts money in a industry wide pensioenfonds, when you retire you get money from that organisation. The pensioenfonds invests that money the way they see fit, not you.
I wish this were true lol
@@joories Maybe it depends on where you work. My company puts money in a personal pension plan and i decide how it is invested. I can choose the funds myself and the distribution of the funds.
Hey guys! Whats your experience with Interactive Brokers? I want to start on there but wanted to ask for an opinion
Nice video.
In Sweden retail investing is definetly on the rise atleast in the people I talk to. We have a few options of robinhood-like apps. Index/mutual funds is still quite large here and longterm stock hodling. So maybe less traders but more investors in Europe?
Thanks for sharing!
Can folk from Sweden Download robinhood and tracy NYSE?
The complicity of the tax declaration in most of the European countries is the main reason behind the reluctance of the European retail investors, it's a big headache to deal with the tax agency and they will always win even if you will hire a tax professional, he or she will never take any responsibility or protect you if the tax agency will have different ideas. The old continent is old ... and it needs a lot of work to bring it back to youth.
A friend of mine from France told me that bcoz their government arrange for their pensions, citizens usually don't buy stocks. People who do buy stocks prefer bluechip companies.
This article did not specifically explain why retail investing has not taken off in Europe. Other than to insinuate that investing is for the upper classes only, not for the great unwashed
Hi Ericson, thanks for your feedback. Actually the greatest differentiator is the lack of a 401(K) system in Europe, which we did go into in some detail.
unfortunately stock brokers from EU didn't accept opening its account for Indonesian people who live in Indonesia...except perhaps investing/trading via interactive brokers or saxo...
⬆😊 Like these in-depth type video presentation ~
Thank you for your kind feedback!
They should ban shorting over there too, where someone borrows your share and sells it in such a way as to trick others that the stock price is falling, and the shorter purchases a panic sell share and returns it to pocket the difference.
The short answer is that many Europeans do not trust the stick market, and instead prefer increasing the state pension through tax and debt.
investing is seen as something only the wealthy do, many don't realize that its because the wealthy invest that makes them wealthy..
Dear CNBC, whilst advertising Robinhood, you forgot to mention the GameStop incident. Why?
I broke-up with my girlfriend Robin Hood.
Maybe because that's not relevant and only affected a bunch of degenerate speculators?
The gamestop was just an "incident " to the hedge funds that shorted more stocks than the amount of floating shares .
Great question, Miltos. There is so much to unpack with Robinhood and GameStop, it could be another ten minute video in itself! We were worried by opening that can of worms, we'd lose the focus of the piece. We also felt it's been pretty well covered and that our audience likely already knew a fair amount about it. But we could be wrong! We're always open to feedback. Keep it coming.
Meanwhile SEC guys planning to ban payment for order flow.
The idea that payment for order flow should make trading cheaper is ridiculous. The cost of a trade will always be composed of the costs (and profits) of the broker, the exchange and the market maker. PFOF only shifts money between those and replaces order fees by less attractive prices / larger spreads.
The only argument in favour of PFOF may be that larger spreads do not affect very small orders as much as fixed order fees. However, this could easily be fixed by changing fee models without introducing an extra conflict of interest via PFOF.
What does truly make trading cheaper is technology / digitalisation and competition, as can be seen even with traditional banks that used to ask a fortune in order fees but have since drastically reduced them. This is of course to a large degree thanks to the advent of discount brokers. As such, PFOF may be a temporary catalyst, but it is not the magic pill that its beneficiaries claim it to be.
Almost everyone I know in the States has an online brokerage account. At lunch, my family often discusses stock trades, competing to see who is more clever -- my 17 year old daughter usually wins.
Europe is not one country. Market participation of retail investors differ greatly between members of the EU which wasn't presented correctly in this piece.
We pay taxes on stocks if we own them based on their potential gains. So I even if you don’t sell you still need to pay taxes based on their worth.
What country? I live in Sweden and that's simply not true.
@@youlooklikeagoodjoeyoulooklone Netherlands, it is called wealth tax. We declare our savings, investments, second home etc. In something they call box 3. You don’t pay taxes on anything below 50k. But everything above 50k you pay a tax on. This tax is not based on what your actual gain is like dividends for example (because they tax those separately with dividend tax).. The tax you pay is an estimate on what the government thinks you might be making on it.
@@TheMadGamingMonkey We should have something like this in Sweden tbh to somewhat counteract our current home price crisis.
@@youlooklikeagoodjoeyoulooklone If that were to happen it would be renters who would bear the load of that tax, since prices would adjust to reflect that increase in costs.
Because people on the U.S. have no labor protections and are looking for every way to get out of that situation
fot this kind of video is so annoying that you tube dos not show the number of dislikes
@@anthonyarcher7268 how can you see that
@@mitch8072 there was some add on that shows you the number of dislikes, not sure what it’s called
Just checked for you. 80 dislikes. 1,653 likes.
In india retail investing is at another level
I love that sweater. El chappo approves 👍
The cat’s out of the HAT. 😂
Just FYI, I can't download Robin Hood here in the EU.
I own stocks. But I'd rather have more of a guarantee and a secure social net with pensions; instead of just learning amd feeling alone like I'm always swimming with sharks.
The lack of trust with the governments the european leaders are among the worst, is making many thirty twenty and forty year olds to start investing in stocks funds or etfs… i believe its the distrust with the governments thats really pushing this trend along with lower commissions
What is the equivalent of Robin Hood in Italy/Europe?
Robino Hoodino
I take pride in the making the majority of my friends start investing;)
Retail investing is huge in Sweden.
Yes for sure, as a Swede aswell everyone I know is investing in stocks and index/mutual funds.
There is retailer revaluation going on India powered by discounted brookers same as Robinhood please make a video on it. Thanks
Hey, what are you doing for that European retail video?
I dunno, greenscreen?
Na, go film in a flower shop to make it seem more relatable.
Some counter arguments:for eu boomers the housing market IS the equivalent of the stock market
I wouldn't conflate investing with trading. But I suppose if everyone had responsible passive portfolios, no one would watch CNBC.
I think Global Access to Capital Markets should be FREE to everyone.
Payment for orderflow is empowering marketmakers to steal your money. IT IS like playing poker but the oponent can always see your cards.
Pfof can allow the big fellas to front run retail. Thats pretty sucky ngl
Couple of things, why is the lack of European the consumer a bad thing. I have a private investor pension in the UK and i leave it as a tracker, consumer are horrible investors and trackers often out preform managed portfolio. Consumer investors only help professional investors to make more money by skimming the consumer investor.
Not saying it's a bad thing, just that it *is* a thing. Thanks for sharing your perspective.
@@CNBCi statutory pensions are mentioned a lot but it's never mentioned that some statutory pensions are effectively stock trackers, which tend to have better return then managed accounts. Also the info graphic at 2:14 seems to suggest the 401k system is far superior to the European model.
401k forcing people into retail investing: "it's a feature not a bug"
most of my friends and part of my family owns stocks. Most of them started when covid began
Woulnd’t say that this is true for the Nordics where we have had a strong market participation since the 2000
In Finland retail investing has skyrocketed past two years and I guess that's mostly same in other nordic countries
there is trade republic in europe
I HAVE INCURRED SO MUCH LOSSES TRADING ON MY OWN...I TRADE WELL ON DEMO BUT I THINK THE REAL MARKET IS MANIPULATED... CAN ANYONE HELP ME OUT OR AT LEAST TELL ME WHAT I'M DOING WRONG ?
Same here, My portfolio has been going down the drain while I try trading,l just don't know what I do wrong
Why is this a segment?
We thought it was an intriguing topic.
Tax systems are also a big problem in Europe. It's hard to conform to the legal requirements for filing taxes.
that criminal from EU protected ivnestors from ivnesting. EU retail are legally barred form buying funds like SPY because of EU regulations.
eToro?
my thoughts exactly.
Europe is not missing on that culture. Europe is smiling on the face of USA's "in money we believe" motto. Moreover, giving common folks the power to lose their livelihood, means taking money from the poors and giving them to the reaches.
Because:
1. we are poor, salaries are much lower than in US. Also higher taxes and inefficiencies
2. stock market financing in not popular in Europe. Bank loans are more popular
3. high fees. for example, the money I invested in private pension fund is at loss because of high fees and poor stock performance
There's not much stocks to invest on european markets, and investing in foreign stocks is risky because you're not always familiar with them.
There are ETFs
GME: HODL
Why buy shares when you can buy into funds?
If you predict a company would outperform an etf that it is in
The take up in the UK of Retail Investing has increased significantly. Poor journalism.
It is easier for them to do forex though
Low income family to trade... Low income family is trying to feed themselves. They ain't investing
no no no bad analogy... they're not like wholesale at all.... they're like royalties... given the best pickings before the peasants get to wet their beak
US is 50 years ahead in terms of capital markets
Europeans don't need to gamble their savings because they have proper pensions systems and no need to repay student debt.
nonsense . check revolut and etorro
Historically, uptake is lower than other developed economies - but it does seem like the momentum is there for that to change!
Europeans are on average significantly poorer than Americans and have lower disposable incomes.
And housing is expensive
Flower markets, stock markets... tulipmania confirmed
We have etoro please 🙏 stop ✋️
12 month inactivity fee
Seriously, we need flowers analogy? Ppl in usa are not that stupid
USA is in a mega bubble
Heard that for nearly a decade...
Copy pasted since 2 decades lmao
well in denmark everyone and their dog is talking about investing
As Charlie Munger said: Robin Hood and co are disgusting. They prey on unedjucated investors by presenting things like options as a game.
If you thinks Robin Hood is a blessing for retail investors you are a fool.
I'm a retail investor, but I envy Europeans with their mandatory pension systems.