The pandemic-driven increase in the number of do-it-yourself (DIY) investors has prompted the Ontario Securities Commission (OSC) to study the recent experiences of self-directed, DIY investors who trade a portion or the majority of their investments through the order-execution-only (OEO) dealer channel.
“We are closely monitoring developments in this investing channel to inform our regulatory activities,” says the OSC’s director of the Investor Office, Tyler Fleming. The OSC adds in a statement that it commissioned the survey of 2,000 investors to know more about who self-directed investors are, why they chose to go it alone for at least some of their investments, and where they get their information.
The study, Self-Directed Insights and Experiences, found that 10 per cent of self-directed investors opened their account since the COVID-19 pandemic began, while half have held their account for five years or more. At the same time, 16 per cent of DIY investors actually began investing with an advisor during the pandemic. “This is especially true among those who believe they have high knowledge about financial matters, those that take a moderate to high level of risk, and those who have less than a year of experience in direct investing,” the OSC writes. Of those surveyed, 74 per cent say they make less than 50 trades per year. “This suggests that a very active minority of investors has driven the large increase in retail trading volumes,” they add.
In looking at the demographics, the survey found that just over one quarter of survey respondents were between ages 18 and 34 and 23 per cent of DIY investors are retirees. They own a wide mix of products, as well: 59 per cent said they own individual securities, 31 per cent own exchange-traded funds (ETFs) or real estate investment trusts (REITs), 21 per cent have traded cannabis stocks, 19 per cent have traded junior stocks and 14 per cent have traded leveraged or inverse ETFs. Less than 10 per cent have traded crypto-assets or options/puts.
The survey also looks at where investors get their information (13 per cent say posts on social media and online message boards like Reddit, Twitter and Facebook are important sources of information), their attitudes towards risk (11 per cent are aggressive while 45 per cent are moderate risk takers) and why they choose to be self-directed investors. Of those surveyed, 44 per cent said they chose the DIY route because they enjoy self-directed investing, 34 per cent are DIY investors because they say advice is too expensive, and 27 per cent said they invested in a self-directed account because they like to take more risk with that account.
The OSC also observes that the demand for self-directed investment accounts surged so rapidly at points during the year that OEO dealers struggled to meet the demand at times. Of those surveyed, one in ten said they experienced issues accessing or logging into their account during the pandemic due to technical issues with their broker or dealer, while 17 per cent had at least one issue during the year being able to enter or complete trading orders.
