Day trading frenzy to continue after the pandemic: Survey

As the nation reopens and moves toward a sense of normalcy in the wake of the pandemic, surveys are still analyzing the behavior of the new investors who flocked to online brokerages in 2020. 

Day trading expanded in 2020 as shelter-in-place orders kept investors who were stuck inside and on screens all day looking for new ways to fill their time, according to a survey conducted between April 26 and May 3 of 1,500 investors released Thursday by Betterment. 

Half of the survey's respondents said they day trade investments, and nearly half of those day traders (49%) have been doing it for two years or less.

While most day traders indicated that their main reason for picking up trading was that they believed they could make more money in a shorter period of time (58%), many (43%) also indicated that it was because it is fun and entertaining. 

Of those who look to day trading for fun, more than half (52%) said it was to make up for the fact that the bulk of their other hobbies weren't available as a result of COVID-19.

These day traders also acknowledge that the pandemic played a key role in their market activity, with 54% saying they trade more often as a result of the pandemic, while 58% said they expect to day trade more as normal activities return and COVID-19 restrictions are lifted. Only 12% said they expect to trade less.

The rise of day trading was also fueled by people investing their stimulus checks. In fact, 91% of respondents said they received government stimulus checks aimed at helping the economy recover from COVID-19-related lockdowns, and 46% said they invested at least some of the latest checks, according to the survey. 

Increased day trading also moved issues around financial education front and center. While 61% of respondents said they rely on financial news websites to pick stocks to buy, 42% say they are influenced by social media, resulting in the power of meme stocks.

More than half (58%) are using less than 30% of their portfolio to actively trade individual securities or stocks. Nearly two-thirds also allow an adviser, either online or human, to manage a separate part of their portfolio.

A wave of young retail investors in the U.S. explored trading for the first time in 2020. More than 10 million new brokerage accounts were opened last year, according to the J.D. Power 2021 U.S. Self-Directed Investor Satisfaction study. 

As a result, more online brokers are interested in widening their reach to young investors by attracting them to learn about financial services before they even have a driver’s license. 

However, this new generation of investors also helped spark the GameStop trading frenzy earlier this year, drawing new attention to the financial literacy threat America has faced for years.