Individual Investors Challenge Wall Street’s ‘Dumb Money’ Label with Record Gains

Individual investors generated $5.4 trillion in trading activity last year, nearly 47% more than the previous year, while outperforming major professionally-managed funds. Delaware residents and others nationwide are increasingly using mobile apps and online tools to make their own investment decisions, moving beyond traditional retirement accounts.

LOS ANGELES (AP) — Individual investors were once labeled as “dumb money” by Wall Street professionals.

This term typically described people who made trades based on excitement rather than solid research, followed popular trends instead of analyzing company fundamentals, or jumped into market movements too late.

Those days appear to be over. New data reveals that individual investors actually beat the performance of two widely-held professional index funds last year – SPY and QQQ – which track the S&P 500 and Nasdaq 100 respectively.

According to Vanda, an independent research company, individual investors generated $5.4 trillion in stock and ETF trading volume in 2025. This represents a nearly 47% jump from the year before and marks the highest level recorded since at least 2014.

“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, at an investor education event held in Anaheim, California, last November that drew around 800 of the financial services company’s clients.

While Americans have participated in stock markets for decades, most did so passively through workplace retirement plans like 401(k)s. However, the past ten years have brought mobile trading applications, commission-free trades, investment-focused social media groups, and accessible online educational resources that have sparked a do-it-yourself investment revolution.

The pandemic lockdowns marked a turning point. New investors, particularly younger people using platforms like Robinhood, fueled the “meme stock” phenomenon that sent GameStop, AMC Entertainment, and similar companies soaring.

Beyond meme stocks, nearly continuous stock market growth created an appealing environment for new investors to enter. The S&P 500 benchmark has only experienced annual losses three times since 2015.

JPMorgan Chase reported that by early last year, transfers from checking accounts to investment accounts hit their highest point since 2021. The bank suggested some of this activity came from younger Americans who couldn’t afford home purchases and chose stocks instead.

Overall, individual investor money flowing into markets increased approximately 50% from 2023 to early 2025, the report found.

“I would say they are considerably more important as a force in markets right now,” said Steve Sosnick, chief strategist at Interactive Brokers. “Markets used to be really dominated by institutional investors, but if you put enough ants together, they can move a very big log.”

Frank Sabia from Encino, California, began investing in 2018. He’s enhanced his market knowledge through private online investor groups and educational seminars like Schwab’s.

“I learned a lot more about options strategies and charting and everything from there,” he said in an interview in November. “Now I’m independent. I just look for my own trades. I have my own strategy. I hunt on my own.”

Sabia, who works as a high school registrar, trades cryptocurrencies and other investments, but considers options trading his “bread and butter.”

Options involve contracts to purchase or sell stocks at predetermined prices before expiration dates. While requiring less initial capital than stock purchases, they carry higher risks since options expire and small stock price changes can create large swings in contract values.

Last April, Sabia opened a Roth IRA and invested during a market crash triggered by President Donald Trump’s announcement of more extensive tariffs than expected. The news caused the S&P 500 to plunge over 10% in two days – the steepest drop since the 2020 COVID crash.

“I just bought the dip,” Sabia said.

He joined many others in this strategy. Vanda data shows individual investors purchased over $5 billion in stocks during those two days of market decline.

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

Individual investors also made significant “buy-the-dip” purchases on October 10, when markets fell 2.7% after Trump threatened a “massive increase on tariffs” on China.

This year has seen continued high activity from individual investors. J.P. Morgan reports their trading reached record monthly levels last month, with particularly heavy activity in late January as the S&P 500 climbed to all-time highs.

Individual traders also drove silver prices to record levels last month through unprecedented purchases of silver ETFs, according to Vanda data.

Charles Schwab’s analysis of its millions of individual investor clients shows they were net stock buyers in January, favoring Microsoft, Netflix, and Tesla.

Many individual investors have expanded beyond stocks and ETFs into riskier investments. Options trading represented about $650 billion of their activity last year and has grown steadily since at least 2019, Vanda reports.

Noah Goodwin, a high school junior in Castaic near Los Angeles, began options trading through Robinhood early last year using his mother’s custodial account with immediate success.

He purchased $148 worth of Nvidia options on January 20, 2025, the same day the tech company’s shares dropped on news about AI developments from Chinese startup DeepSeek.

Goodwin sold his options that same day.

“I made a $200 profit. My very first trade!” Goodwin said in an interview in November.

Not all his trades succeeded. In July, he attempted to profit from tariff-related market volatility but miscalculated.

“I lost a lot of money, like probably like around $600 to $800,” he said. “So, a horrible month for me.”

“For the most part, with only some exceptions, buying the dip has tended to be a very profitable tactic for many retail investors,” said Sosnick. However, he warned that this strategy sometimes leads to trading decisions without fully considering risks and rewards.

“The risk to it is that for many of them it’s become sort of mechanical,” he said.

Many individual investors balance high-risk moves with long-term portfolio building.

Andy Hu, a Los Angeles financial analyst who attended the November Schwab event, keeps 50% of his portfolio in the SPDR S&P 500 ETF Trust, which tracks the S&P 500’s performance.

For short-term trading, he focuses on micro-cap stocks – very small public companies that can experience dramatic price swings due to limited trading volume.

This approach generated approximately 20% gains in his active trading account through the first eleven months of last year, he said.

Hu stopped trading near year’s end when big tech company declines helped push the S&P 500 to a December loss, dampening Wall Street sentiment.

“I haven’t made a single trade in the last two months,” Hu said.