Retail Investors’ Behavior in the Digital Age: How Digitalization is Impacting Investment Decisions

Abstract

Technology has dramatically changed how retail investors invest. We discuss four emerging trends in retail investors’ behavior, related to technological change: the use of mobile apps, robo advice, social media platforms, as well as the rising interest in crypto investment. New technologies are offering easier access to investment, at lower cost, and are raising retail investors’ interest. Some digital services (trading apps, social media) had an unexpected negative impact on investment behavior, such as increasing turnover and amplifying investment biases (return chasing, disposition effect). Other technologies, like robo-advisors, greatly helped retail investors to define a strategic allocation, rebalance, and ultimately reducing their investment mistakes.

Keywords: household finance, digitalization, robo advice, trading platforms

JEL Classification: G11; G5