From dabblers to day traders, small investors’ impact on Wall Street grows even in volatile market

The once-dismissed “dumb money” of retail investors is proving increasingly sophisticated, outperforming some of Wall Street’s most popular professionally managed index funds last year.

Individual investors generated $5.4 trillion in trading activity across stocks and ETFs in 2025, a nearly 47% increase from the previous year and the highest level since at least 2014, according to data from independent research firm Vanda.

“I personally want to dispel the myth of retail being dumb money, because it’s not dumb money anymore,” said Joe Mazzola, head trading and derivatives strategist at Charles Schwab, during an investor education event in Anaheim, California last November that attracted approximately 800 of the financial service company’s clients.

The landscape of personal investing has transformed dramatically over the past decade. Mobile trading apps, commission-free trading, investment-focused social media communities, and readily available educational resources have democratized market access and knowledge. The COVID-19 pandemic further accelerated this trend, as lockdowns gave people both time and motivation to learn about investing.

During this period, a new generation of investors emerged, many using platforms like Robinhood to participate in the “meme stock” phenomenon that sent shares of companies like GameStop and AMC Entertainment soaring. Beyond these headline-grabbing events, the broader appeal of investing has been supported by years of predominantly strong market performance, with the S&P 500 posting annual losses only three times since 2015.

By early last year, JPMorgan Chase reported that money flowing from checking accounts into investment accounts had reached its highest level since 2021. Some analysts believe this trend reflects younger Americans redirecting funds toward stocks when unable to afford home purchases. Overall, money entering the market from individual investors jumped approximately 50% from 2023 to early 2025.

“Markets used to be really dominated by institutional investors, but if you put enough ants together, they can move a very big log,” noted Steve Sosnick, chief strategist at Interactive Brokers.

Frank Sabia, a high school registrar from Encino, California, exemplifies this evolution. Beginning in 2018, Sabia has gradually built his expertise through online investor groups and educational seminars. “Now I’m independent. I just look for my own trades. I have my own strategy. I hunt on my own,” he explained.

While Sabia trades various assets including cryptocurrencies, he focuses primarily on options trading—buying and selling contracts for stocks at specified prices and dates. Though potentially lucrative, options trading carries significant risk as contracts expire and small price movements can trigger dramatic value changes.

Last April, when markets tumbled following President Donald Trump’s announcement of extensive tariffs, Sabia opened a Roth IRA account and capitalized on the dip. This strategy proved popular among retail investors, who collectively purchased more than $5 billion in stocks during the two-day, 10% market decline.

“In April, it was retail (investors) that bought the dip,” Mazzola observed. “They were the ones that were willing to step in front. They saw the opportunity.”

A similar pattern emerged in October when markets dropped 2.7% after Trump threatened additional tariffs on Chinese imports, triggering another major “buy-the-dip” response from individual investors.

This momentum has continued into 2026, with retail trading activity reaching an all-time high on a rolling monthly basis in January, according to J.P. Morgan. Retail investors were particularly active as the S&P 500 climbed to record highs and played a significant role in driving silver prices to unprecedented levels by purchasing record amounts of silver ETFs.

Recent analysis by Charles Schwab reveals that its retail clients were net buyers of stocks in January, with Microsoft, Netflix, and Tesla among their preferred investments.

Many retail investors are diversifying beyond traditional stocks and ETFs into riskier vehicles like options trading, which accounted for about $650 billion of their trading activity last year—a figure that has been steadily increasing since at least 2019.

Noah Goodwin, a high school junior from Castaic, California, began options trading on Robinhood early last year through his mother’s custodial account. His first trade—$148 worth of Nvidia options purchased when the tech giant’s shares dropped on news of AI advances by Chinese startup DeepSeek—resulted in a $200 profit the same day. However, Goodwin later experienced losses of $600-$800 in July when his market volatility strategy backfired.

“For the most part, with only some exceptions, buying the dip has tended to be a very profitable tactic for many retail investors,” Sosnick said, though he cautioned that many have adopted this approach mechanically without fully considering risks and rewards.

Many retail investors balance higher-risk trading with long-term investment strategies. Andy Hu, a Los Angeles financial analyst, maintains 50% of his investment portfolio in the SPDR S&P 500 ETF Trust while focusing his short-term trades on micro-cap stocks—very small publicly traded companies that can experience significant price volatility due to low trading volumes. This approach had generated approximately 20% returns in his active trading account through the first eleven months of last year.

As market conditions shift, so do retail investor strategies. Hu paused his trading activity when tech stocks pulled back in December, contributing to the S&P 500’s monthly loss and dampening Wall Street sentiment. “I haven’t made a single trade in the last two months,” he noted.