3 November 2008: The Rise of the ‘Instividual’ – Investors doing it for themselves

• Investors known as ‘Instividuals’ are demanding the same techniques, products and services as their Institutional counterparts
• A fifth (22 per cent) of investors have traded even more in recent market conditions to take advantage of opportunities
• 27 per cent of online investors* trade on a weekly basis
• Increase in usage of sophisticated products such as FX trading, CFDs and ETFs

A new report from Barclays Wealth has found that despite market volatility dominating the past year, a new breed of retail investor is emerging – ‘The Instividual’.  Within the last decade, online trading has increased from 0.1 per cent to 85 per cent of trades and there has been a sharp increase in the usage of products such as FX trading, CFDs and ETFs amongst online investors in the last 12 months**.  While just a few years ago individual investors could only dream about having the same resources available to them as institutions, the landscape has quickly transformed and technology, products and services have developed at such pace that private investors are fast catching up with the professionals.

Even in periods of extreme market volatility, the ‘Instividual’ investor has increasingly found opportunities to boost returns on their investments.  One in seven (14 per cent) investors have still traded regularly throughout the last year and over a fifth (22 per cent) have actually traded more than usual because there have been so many opportunities. 

In periods of volatility, Barclays Stockbrokers typically sees a spike in purchases as clients trade on falling markets to boost returns.  On Friday 10 October, which some dubbed ‘Black Friday’, when the FTSE fell to 3932.10, 73 per cent of trades were buys compared to 27 per cent sells.  Banking stocks and the financial sector have driven most of the equity trading activity, with investors accessing stocks at a significant discount compared to recent months.  It is not just active clients who are trading in these conditions, 68 per cent of trades were placed by typically less active clients, over the phone or through certificates.  

Des Byrne, Managing Director and Head of Barclays Stockbrokers, says: “We broke the ‘busiest’ week ever record twice in October; we have seen an increase in activity across the board and this is not just from day traders.    Like the ‘dot com’ boom, people are dipping their toes in the water for the first time, but the difference this time is they are equipped with knowledge, not to mention that this is happening when the market is weak and cheap, rather than strong and expensive.  We have seen investors becoming increasingly savvy about their investments through a time of extreme turmoil within the markets and they are taking things into their own hands when making decisions.”

Individual investors can now utilise a wide range of sophisticated products to execute their trading activity, not only this but they are diversifying their trading activity away from long and short positions on single stocks and into other underlying markets.  There has been a marked increase in usage of products such as FX trading, CFDs and ETFs in the past year as online investors have been diversifying their portfolios to protect them against market volatility.    Just under a third of online investors said that they were already using FX trading (up 6 per cent to 30 per cent from the same time last year), 26 per cent spread trading (up 9 per cent), 14 per cent CFDs (up 5 per cent) and 23 per cent Exchange Traded Funds (up 9 per cent).

In recent market volatility, investors have been using these sophisticated techniques to gain returns.  Currency markets have been extremely volatile in recent weeks but investors have been taking advantage of this, on Monday 13 October the most heavily traded pair on the Barclays Stockbrokers FX platform was GBP/USD as clients reacted to falling sterling.  In September, volumes in FX trading doubled month on month. 

Barbara-Ann King, Head of Proposition at Barclays Stockbrokers, continues: “We have seen providers on the supply side meeting the changing needs of investors by making available the products and services that were once the preserve of traders at financial institutions.  We have seen that in equity and FX trading there has been a convergence of markets which has resulted in price parity and private investors getting the same transparency and prices institutions benefit from.  In line with this we have seen our clients becoming increasingly sophisticated over the past year – for example, on Monday 13 October we saw double the number of open buy trades (longs) on CFDs  compared to short trades (open selling).”

Profile of ‘The Instividual’

When it comes to their day to day investing behaviour, online investors like to take control of their investment decisions.  Barclays Wealth research found that 74 per cent (up 4 per cent year on year) had full control over their investment decisions, 25 per cent felt they had started to gain more control and just 2 per cent relied on advice from investment professionals.  The proportion of online investors trading on a daily basis is up by more than 100 per cent year on year.  On average, 16 per cent of online investors trade daily (up from 7 per cent last year), more than a quarter (29 per cent) trade every week, while 16 per cent trade once a month.  One in ten online investors (11 per cent) trade over £5000 and 21 per cent trade between £1000 – 2000.

Frequency of trading is related to age with those investors that trade daily or weekly more likely to be in the 17-24 age bracket (38 per cent trade daily and 23 per cent weekly).  The next most active investors are aged 25-34 where 22 per cent trade daily and 44 per cent weekly.  There is little distinction between male and female investors with 16 per cent of men and 13 per cent of women saying they trade daily (and 30 per cent versus 26 per cent weekly).

Des Byrne, Managing Director and Head of Barclays Stockbrokers, concludes:  “The growth of direct trading is a real challenge to the status quo.  We expect to continue to see fast evolution in the market as clients become more sophisticated and demand more efficient and transparent trading.  With markets set to stay rocky for some time we expect  the ‘Instividual’ investor will continue to grow in confidence and to employ institutional techniques to achieve returns.”

To receive a full copy of the report contact Caroline Wells, Barclays Wealth on 020 7114 7435 or download the PDF.

* Research conducted by Accent Research amongst 501 online investors (those that either trade for themselves or trade for themselves and with the help of a broker).  The research was carried out 18 – 24 September 2009.

** This breed of investor is sophisticated and willing to undertake the risks associated with this type of product.

For further information contact:

Caroline Wells / Jignasa Patel
PR, Barclays Wealth
020 7114 7435 / 020 7699 2483

OR

Katie Hayward / Katherine Hobby
Lansons Communications
020 7294 3631 / 020 7566 9704
katieh@lansons.com / katherineh@lansons.com