The Rise of the Retail Investor: How Technology is Making Investment Accessible to All

The rise of retail investor uprising in the capital market that came to the fore across the globe (including India) during the COVID pandemic is going to last long. This is because technological advancement in the field of investing has empowered smaller investors and levelled the field for them with institutional investors. As COVID-induced restrictions hampered mobility and people were locked in their homes, investors resorted to the stock market for supplementing income – Close to 150 lakh new investor demat accounts were opened at the onset of the pandemic in India during 2020-’21 to facilitate stock market trading through digital apps. 

The stock market is considered one of the most effective ways to grow your wealth, provided you have the right information, knowledge, and expertise to make informed investment decisions. However, for a long time, retail investors in India had limited access to critical information and investment opportunities, which resulted in a significant disadvantage compared to their institutional counterparts. But this is not the case now. Extensive use of technology in India’s BFSI sector has played crucial role in providing a competitive advantage to retail investors vis-à-vis their institutional counterparts.

One of the most significant advantages of technology is the democratization of information for retail investors. With real-time data available at the click of a button, retail investors can make informed decisions based on market trends, company news, and other critical information. Additionally, real-time auctioning platforms ensure transparency in the trading process, ensuring that everyone is playing on the same field, irrespective of their status. Gone are the days when retail traders were at a significant disadvantage due to delayed access to information, which benefited a select few with pre-access to information.

The ability to obtain real-time performance data has also become a reality through new-gen trading platforms. For instance, unique features like a customized individual index, which showcases portfolio performance every minute, have become a key factor in empowering retail investors to make rational investment decisions. The availability of sufficient fundamental data like balance sheets and corporate earnings calls has also provided a better understanding of the market’s inner workings.

Technology, along with the combined efforts of regulatory bodies like Securities and Exchange Board of India (Sebi) and Stock Exchanges (SEs), has also tried to eliminate fraud with stockbrokers and other intermediaries. The use of digital signatures, e-KYC, third-party fund verification, Peak margin rules, real-time enhanced monitoring of customer funds from Sebi, and other safety measures ensure that investors can now have peace of mind while investing online. By enforcing strict compliance and surveillance norms, Sebi and SEs have worked together to ensure that fraud remains at a minimum, providing a safe and secure environment for retail investors to invest their hard-earned money.

Advantages of robo-advisories

One of the latest advancements is the emergence of Robo-advisory and technologies that assist retail traders with their trading, thanks to Artificial Intelligence (AI) and Machine Learning (ML). As the retail investor base continues to grow, we can expect to see even more such tools and products that not only prevent investors from making mistakes but also learn from their trading patterns and act as a coach or guide to help them become better investors. With these advancements, retail investors can make informed decisions while taking advantage of the latest technologies, ensuring that they stay ahead in the ever-changing market.

Through innovation, technology has transformed the investment landscape for retail investors, and this is just the beginning. As we enter an era of rapid technological advancement, it is evident that the retail investor will be at the focus of this change.

(Pratik Adani, Co-founder & CTO, SAMCO Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)