Investment portfolios belonging to retail traders suffer a $350bn blow in 2022

That said, there are signs that some retail investors took fairly defensive positions that paid off this year. Their portfolios were overweight energy companies like Chevron and Enphase Energy and drugmakers including AbbVie , which broadly outperformed the broader markets.

“Investors have learnt to be a little more nimble in this environment,” said Callie Cox, an investment analyst at eToro Group . “When everything isn’t going up, you need to be more strategic.” 

Of course, that 30% average drop estimated by Vanda speaks to how difficult it actually is to be nimble in a collapsing market. JPMorgan is even more pessimistic about the performance of retail traders, estimating they suffered losses of 38% this year.

For individuals who also dabbled in the cryptocurrency market or digital assets like non-fungible tokens, the losses are likely even uglier. Bitcoin is down 64% this year, while the Bloomberg Galaxy Crypto Index, a basket of different tokens, has erased two-thirds of its value.

Meme Madness

One of the strangest phenomenons to emerge from the retail trader frenzy during the most severe pandemic lockdowns were so-called meme stocks that became popular on internet chat boards. A group of 37 meme stocks tracked by Bloomberg has tumbled 38% this year. 

Of those stocks, 11 have crashed more than 70%, with companies like Newegg Commerce and Bed Bath & Beyond seeing some of the worst drops, data compiled by Bloomberg show. GameStop , which helped spark the meme movement, has erased one-third of its value in 2022, while AMC Entertainment Holdings, another meme poster-child, is down 64%.

“Going forward, investors will take this year as a lesson learnt and will become more sophisticated,” Cox said. “Retail traders will probably stick in this longer than people expected because the traders that have been hit really, really hard this year are younger investors with higher risk tolerance.”

With Denitsa Tsekova.

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Source: businesslive.co.za