A recent report by Investment Trends revealed a decline in online investor activity in the United States for the second consecutive year. The 2023 US Online Investing Report showed that 11.4 million American adults engaged in online stock or ETF trading over the past year, down from 13.3 million in 2022. Despite this downturn, more than half of active online traders have seen their investments perform better than the previous year.

US Investor Activity Declines Visibly

The report delves into the complete spectrum of self-investing, from long-term "buy and hold" investors to frequent traders. It found that the decline in online investor numbers aligns with softer client inflows and a surge in dormant accounts. Notably, 30% of US online investors ceased trading in the past year. This coincides with other regions where investor activity declined as much as 40%.

Lorenzo Vignati, the Associate Research Director at Investment Trends, observed that the US online investor market decline has become a longer-term trend. "For two consecutive years, this market has witnessed a rise in investors suspending their trading activities, accompanied by a slowdown in the influx of new investors entering the market," Vignati commented.

These findings align with another report published by Investment Trends a few months ago. Finance Magnates reported at the time that there has been a decline in the number of retail investors in various major financial centers since the beginning of 2022. In addition to the US, this included the UK, France, Germany, Singapore, and Australia. The exception turned out to be the United Arab Emirates (UAE), which achieved a record number of traders in the leveraged market, totaling 49,000.

Positive Trends amidst the Decline

Despite the overall decline, the report found a silver lining to the situation. Over half (51%) of active online investors reported better investment outcomes in 2023 compared to the previous year. Additionally, a bullish sentiment prevails among online investors regarding the S&P 500, with 63% expecting it to rise in the coming year.

Investment Trends has released its latest 2023 US Online Investing Report pic.twitter.com/HOAS3kV94g

— Damian Chmiel (@ChmielDk) October 10, 2023

The report also highlighted shifts in the demographics of new online investors. While the current cohort remains predominantly younger, they are significantly wealthier than any group observed during the pandemic.

Vignati noted that the key driver for these new entrants was the need to manage retirement savings and a desire to learn new skills. "This sends a clear signal to platforms in this space to continue supporting all their customers with the tools, information and education to ensure they remain as active investors," he added.

The Growing Need for Financial Guidance

The study found that one in two online investors prefers to consult a human financial advisor for investment decisions, and there's been a slight boost in the use of financial advisors among online investors, from 25% in 2022 to 28% in 2023. Vignati concluded that more than 80% of online investors still have unmet needs for advice, emphasizing the requirement for human and digital advisors in this space.

Artificial intelligence is partially beginning to meet this need. As shown by the Investor Index study, 73% of investors in the United Kingdom would be willing to trust ChatGPT for financial advice in the coming years.

"Once more, this presents an opportunity for platforms to create a distinctive proposition with tailored content that caters to the entire investor base," the Associate Research Director at Investment Trends commented.

Another recent report by Vignati's company analyzed the UK market and showed that almost 50% of the local traders feel the inflation blues and seek cheaper investment and saving solutions.