How Retail Investors Make Decisions (2024)

Author: Max Rothery, VP Community at Finimize

I'm obsessed with the way retail investors make decisions.

Retail investor activity was booming back in January 2021, and it got me thinking. Over one million people a day were downloading fee-free trading apps, and 75% of those were just Robinhood. And get this: a quarter of all trades on the stock market were made by retail investors.

I’d spent three years at Finimize discussing how we could give folk the confidence they need to invest. And all of a sudden, I was seeing millions of retail investors making decisions, with confidence, in minutes.

The world of investing had changed. I wanted to understand the new behaviors that came with it, so I sat down with hundreds – and surveyed thousands – of our million-strong retail investing community. Here’s what I found out.

How Retail Investors Make Decisions (1)

There are three phases to every investment decision

The folk I spoke to sit somewhere between complete beginners and professional investors: they know they should be investing, but they don’t have the time to do detailed research and analysis. (Or more accurately, they haven’t found the right service to do it for them.)Every investor I spoke to followed the same three phases: discovery, research, and execution.

Phase 1: Discovery

Idea discovery is passive for most retail investors. They typically curate their “information diet”, a stream of information they can scan through as part of their morning routine – from the news, social media, newsletters, and friends. The more sophisticated the investor, the more curated their information feed. If the feed sparks an idea, that’ll trigger the research phase.

How Retail Investors Make Decisions (2)

Phase 2: Research

Modern investors do lazy research. They head to Google, often transitioning from a mobile device to the web. They search: “is X a good investment?”, and pull up five to ten different tabs across blogs, free Bloomberg articles, and Seeking Alpha opinions.

Financial data

Most of our community knows that financial data's important, and they might head to Yahoo or Google Finance to check out the figures. But time and time again, I’d see them look at a page of numbers with no idea what they really meant. As for those who knew exactly which metric they were looking for, well, they still weren't sure whether a P/E ratio of 12 is good enough. I asked one member why they did it: “Because I feel like I should, so it makes me feel like I’ve at least done some research”.


94% of those surveyed said they validated investing ideas with others, and they seem to put as much weight on their peers' opinions as they would in an analyst's report. That speaks to the way we build conviction in our decisions: no single source dictates where we put our money, it’s typically a collection of proof points instead. That can be anything: something that's trending in the news, a product you keep spotting in your daily life, an encouraging piece of analysis, or a friend's positive experience with the stock.


Some would make notes during this process to capture interesting analyst opinions, key data points, or major news. A tiny percentage had a decent way to store those notes, sure, but the vast majority kept a mash of Apple notes, paper, and emails. A handful couldn't even find the fruits of their research labor.


A watchlist is a list of curated stocks you’re researching while you wait for the right entry point, and it can help you build a better picture of how the stock performs relative to the markets and its peers. For some, a watchlist is the first place they check before they make an investment decision. But for most time-poor investors, watchlists are just a graveyard of stock ideas they once had with no correlation to each other.

Phase 3: Execution


Executing trades in markets (with developed financial infrastructure) is the smoothest part of the journey. Fee-free trading apps have made it cheap, fast, and frictionless to buy stock – and retail investors have become platform-agnostic. Most have three to five apps they use to buy stocks, and whichever offers the broadest coverage and the easiest user interface for the cheapest price will normally win.


The decision to invest typically hits after they’ve got their pay-check and paid their bills. Some beautifully curated notes and watchlists would add real value to an investment decision, but folk usually just end up more easily influenced around this time.

Risk management

When retail investors do invest in risky assets like individual stocks, they tend to do so with small amounts of money. They monitor how that investment performs, then continue to add to that investment depending on their conviction over time.

What does this mean for the wealth industry?

At Finimize we believe in empowering: that means building around our members' behaviors, not trying to change them. I discovered that the current modern investor's decision-making process is highly fragmented – and to truly democratize investing for everyone, we need to go beyond the platforms and tools. We need to turn our attention to investing information, and the quality of that experience should be designed with the modern consumer in mind. Just imagine what difference it would make to modern investors if researching your next investments was as convenient as curating a playlist on Spotify. To me, this is an opportunity prime for every brand in the wealth-building industry to seize.

Keen on partnering with Finimize?

Finimize is a financial insights platform that supports the most engaged retail investor community in the world. We’ve helped more than 250 brands with growth and engagement, from fintech disruptors to traditional financial services brands. Get in touch here.

How Retail Investors Make Decisions (2024)


How Retail Investors Make Decisions? ›

There are three phases to every investment decision

How do investors make decisions? ›

Before making any investment decision, investors need to perform an investment analysis. They need to analyze the overall economy, specific industries, economies, and global politics, to get an understanding of where they can find value and where they can avoid risks.

How do retail investors get information? ›

Retail investors get their information from brokers and advisors as well as from their own research.

What are the 5 stages of the investment decision process? ›

5 Steps of Investment Process
  • Setting Financial Goals. Establish clear financial goals to form the foundation of your investment process. ...
  • Assessing Risk Tolerance & Determining Returns. ...
  • Creating a Budget and Emergency Fund. ...
  • Diversifying Investment Portfolio. ...
  • Regularly Reviewing and Balancing Portfolios.
Apr 2, 2024

How do investors decide what to invest in? ›

To know the right allocation strategy for you, you need to understand your tolerance for risk. If temporary losses keep you awake at night, concentrate on lower-risk options like bonds. If you can weather setbacks in the pursuit of aggressive long-term growth, go for stocks. Neither is an all-or-nothing decision.

What strategy do most successful investors use? ›

Value investing is best for investors looking to hold their securities long-term. If you're investing in value companies, it may take years (or longer) for their businesses to scale. Value investing focuses on the big picture and often attempts to approach investing with a gradual growth mindset.

What is the most common mistake people make when investing? ›

Common investing mistakes include not doing enough research, reacting emotionally, not diversifying your portfolio, not having investment goals, not understanding your risk tolerance, only looking at short-term returns, and not paying attention to fees.

What do retail investors want? ›

Retail investors frequently invest in companies that they are familiar with from their own daily lives and purchasing habits. This often tends to be larger, "blue chip" companies. ETFs have also become very popular with retail investors as these funds allow investors to achieve instant diversification.

What percentage of retail investors lose money? ›

90% Retail Investors Lose Money - Only the top 5 per cent profit makers account for 75 per cent of profits. Saad Bhakshi, an aspiring pilot, is addicted to stock market investing. He mostly dabbles in stocks and invests in IPOs.

How do investors track their stock? ›

A portfolio tracker should help monitor investments within your financial portfolio, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Although each investor is unique, some of the key features and benefits for portfolio management apps include: A free version of the app.

What is investment decision technique? ›

Investment decisions are considered long-run decisions because they involve a substantial commitment of resources and impact the company over a long period. These decisions should be evaluated with a future-oriented perspective, considering future impacts on growth and profitability.

What is the 5 rule of investing? ›

This sort of five percent rule is a yardstick to help investors with diversification and risk management. Using this strategy, no more than 1/20th of an investor's portfolio would be tied to any single security. This protects against material losses should that single company perform poorly or become insolvent.

What factors should an investor consider while making investment decisions? ›

Here are the top ten essential factors to consider while making investment decisions.
  • Risk tolerance. Your risk tolerance is your ability to withstand financial losses. ...
  • Investment time horizon. ...
  • Investment objective. ...
  • Asset allocation. ...
  • Fundamentals of the investment. ...
  • Market trends. ...
  • Fees and charges. ...
  • Tax implications.
Mar 19, 2023

What is the golden rule of investing? ›

Warren Buffet's first rule of investing is to never lose money; his second is to never forget the first rule. This golden rule is key for long-term capital protection and growth. One oft-used strategy to limit losses in turbulent markets is an allocation to gold.

What is the Buffett rule of investing? ›

“The first rule of investment is don't lose. The second rule of investment is don't forget the first rule.” Buffett famously said the above in a television interview.

How do successful investors invest? ›

Most successful investors start with low-risk diversified portfolios and gradually learn by doing. As investors gain greater knowledge over time, they become better suited to taking a more active stance in their portfolios.

What is the basis of decision for investors? ›

Some of the methods used in making investment decisions include Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, Profitability Index, and Discounted Cash Flow (DCF).

How do institutional investors make decisions? ›

An institutional investor is an entity that makes investments on behalf of someone else. They gather insight and analytical data from Institutional Shareholder Services (ISS) providers that help them make informed shareholder decisions.

Who makes investment decisions? ›

Investment decisions are made by investors and investment managers. These decision are made based on the finding of analysis tools based on data available about the companies. Investors commonly perform investment analysis by making use of fundamental analysis, technical analysis and gut feel.

How do people make financial decisions? ›

What are the four tips to making smart financial decisions?
  1. Tip 1: Understanding needs vs. wants.
  2. Tip 2: Creating a spending plan.
  3. Tip 3: Maximizing savings opportunities.
  4. Tip 4: Putting the plan into action and sticking with it.

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