The Value of Retail Investors
Today, over 50 million households in North America engage in some kind of investing activity—from dabbling in penny stocks to large investments in established companies. If you read the news, it’s no wonder why. Countless stories of people doubling, tripling, even quadrupling their investment on a well-educated stock decision are everywhere.
Every day individuals are investing in different ways, with different risk tolerance, and there are many interested in joining the ranks of retail investors, given the right opportunity.
Who is a Retail Investor?
A retail investor (or “private investor”) is any individual who, through online brokerage or investment accounts, buys and sells securities, mutual funds, or exchange traded funds (ETFs). Basically, they use their own money to become a part owner of companies they like and support.
It’s easier than ever to become a retail investor: Most brokerage firms have online portals, and it can take just a few minutes to get verified and set up to start trading. So who exactly is a retail investor? It could be just about anyone.
The retail investor does sometimes get a bad rap. You may hear criticisms of the “unprofessional” investor being short-termist, unsophisticated, or just too difficult to include in the investor relations process. This type of judgement often causes companies to ignore the retail investor segment of their investment marketing strategy. But make no mistake. Retail investors can be a significant asset to your company.
5 Reasons to Value the Retail Investor:
1 – Your competition isn’t.
According to a 2014 NIRI (National Investor Relations Institute) survey, 77% of investor relations departments say they do NOT actively seek to attract retail investors. To put it another way, only one-quarter of companies engaging in investor relations have a strategy to communicate with and market to retail investors. Developing an investor marketing strategy that includes this large segment of potential investors already puts your company on the map. To read more about challenges and solutions to investor communications, directly as it relates to retail investor marketing, read our article: 8 Common Challenges of Investor Communications.
2 – They value the long game, and so should you.
Retail investors tend to buy and hold their stocks for a longer period of time than the professional institutional investors. Your everyday person is hoping to fund their children’s college education and their own retirement or other dreams; this motivates them to store away stocks, and not simply bail at the first sign of trouble. The trend to stay on board is particularly strong if the company builds trust by including them in communications and updates, and periodically giving opportunities to share their input. Long-term investors are important to public companies, and retail investors may be just those stelwarts that you need.
3 – If you want a buzz, they can help.
When was the last time you heard chatter about a new stock that’s worth a look? Unless you work for a financial institution, chances are you heard it from a friend, on social media, etc. When retail investors choose your opportunity, (and especially if you tell your stock story in a compelling way) they often become stock advocates, and generate buzz around your offering. They may consult friends for advice, or get input on an investor forum online about the opportunity, or they may even try and convince their circle to join them in the investment journey. On the other hand, retail investors also may be more likely to voice their concerns on public platforms such as your company’s social media pages. But we advise on how to consider that in your investor marketing strategy as well, in our article on responding to negative social media comments.
4 – Institutional investors may follow tides of retail investors.
When interest from retail investors is evident, it may be more likely that institutional investors take notice and jump on board with your company. Institutional investors are likely to hang back–they’re waiting to see if your company is legitimate and if the offering is sound. Retail investors, on the other hand, may be drawn by the opportunity to become early adopters. With a good supply of retail investor support, not only may the overall gains rise for your company, but also the strength of the opportunity may be perceived higher by institutional investors.
5 – Reaching retail investors does not have to devour your resources.
According to a 2016 NIRI Social Media survey, while only 15-17% of analysts have an interest in using social media for investor relations, 47% of retail investors do. Many retail investors are using everyday digital media solutions to seek out information on their investment opportunities. Facebook, Twitter, LinkedIn, Reddit, Instagram, Google, and a myriad other digital solutions are in the average retail investor’s toolkit. Developing a clear investor marketing strategy and planning investor communications for your company to include digital relations can make reaching a wide base of investors straightforward. Some processes can be automated to reach your audience. Many tools even offer detailed analytics to help you see what is working and what isn’t to adjust your strategy. In some cases, like with emails and social posting, tools exist that can allow you to schedule posts for optimal view times, maximizing your chance of news being seen. These digital solutions can save you time and money, compared to the traditional IR tactics, requiring phone calls, face-to-face meetings, and lots of expensive travel. And what’s more — this is how they’re already communicating.
When planning your investor communications, be sure to include the retail investor. The opportunity is great, and the expense does not have to break your bank!
Most investor marketing problems can be solved by a clear, comprehensive, investor communications strategy. Don’t want to do the heavy lifting? Give Plexus Media a call today – 1-844-6PLEXUS ext. 108