Kim Fournais, founder of Saxo Bank:

"Great changes in the capital market: Individual investors actively participate in the stock market during the epidemic, and the diversification of investment entities helps the stock market to improve in the long run"

In 2020, we experienced a once-in-a-century coronavirus epidemic, and the stock market ushered in the most volatile and active trading year in modern times. Looking back at the big financial-related events since the outbreak, the surge in trading by individual investors is certainly striking.

It can be said that we are witnessing a huge change in the capital market, and more investors are choosing to participate in it.

In this era of zero or even negative interest rates, the ability for individual investors to gain direct access to capital markets means they can take better control of their financial and financial futures and enjoy the long-term compounding growth that can only be achieved through investment.

What's more, investment is also one of the most effective ways to influence the world.

More level playing field

Loose monetary policy has been extended for nearly a decade, and this endless quantitative easing and negative interest rates have had a huge impact on the social fabric, exacerbating the gap between rich and poor.

Real estate, private equity and equity markets have benefited from higher monetary policy, with asset owners as the absolute beneficiaries, while the vast majority of ordinary people have been left out of the extra wealth created by higher markets.

Many people are increasingly frustrated with what they see as a world in which only the elite enjoy the benefits of global progress. Voters also realized that their votes in the election could not create their ideal world.

None of these complex issues are easy to solve and require multifaceted analysis, and greater participation of ordinary people in capital markets may be one solution.

Investing in a company can benefit from the value it creates, helping you realize your personal capital growth dreams while also supporting the businesses and industries you care about.

More and more investors want to be able to make their own investment decisions, which is a trend and an important step in the true democratization of the capital market. Investors not only want to be able to control their own financial future, but also want to be able to influence the course of the world by investing in companies.

Flat growth

Growth in personal investment has been modest. Recent data show that individual investors account for 20% of trading volume in the U.S. stock market, which can increase by 25% during periods of high market volatility.

After the outbreak of the epidemic, more individual investors believe that the rebound of stock prices is a good opportunity to "make quick money", and most individual investors have begun to increase the scale of their active management of funds.

The volatile market presents plenty of opportunities for experienced traders, but it also attracts newcomers who have accumulated some savings and are looking to start investing, as well as a large proportion of long-term investors who used to leave their money in bank funds

It pays high management costs for a long time, but the return on investment is very modest.

Some people are also slightly arrogant to believe that individual investors only know the high level of the market to chase bubbles, when it is really "stupid people have more money."

However, the fact is that many individual investors calmly increased their positions after the market plunged in March, but some professional fund managers have reduced their positions to cash out, and found that they missed the best time after the rapid rebound of the market, and then rushed to cover their positions.

Saxo Bank is also feeling the enthusiasm of active investment from individual investors around the world, with more than 80,000 new customers added to the platform in the first half of 2020. For most of these investors, it's not just about timing, it's about the market having its time window.

We would certainly like to see more individual investors in the capital markets who want to take control of the future of their wealth, but at the same time there is a greater responsibility on the shoulders of investment service providers.

After the market noise, only investment platforms and service providers that realize that the personal investment trend has arrived will stand out. A platform that can lock in these investors for the long term must not only provide access to global markets, but also provide investors with the right tools, content, analytics, and services to help them make investment decisions efficiently and comfortably.

We have a lot of work to do in providing our clients with the full investment journey, such as helping investors get sound investment ideas, effectively managing risk, and encouraging investors to diversify their portfolios appropriately. For long-term investors in particular, even a small share is better than nothing.

However, the key to long-term investment success is to diversify your portfolio across industries, asset classes and country regions.

Go beyond zero commission trading

In our view, it is too simplistic to attribute the rise of individual investors directly to the emergence of zero-commission platforms, particularly in the US.

First, the huge increase in individual investors is a global phenomenon, not just confined to the United States.

Second, the implication is that free investment promotes investment. But low fees and commissions have been around for more than three decades and have lowered the barriers to investment.

Thirty years ago, the asset management industry was riddled with complex fee structures and very limited product choices, with traditional banks charging as much as $100 for a simple stock trade, lack of transparency and poor execution.

When I founded Saxo Bank in 1992, I wanted to break this old market order, use better technology to enable innovation, and put customers first.

Saxo and other similar players managed to change the market landscape and bring transaction fee rates down to an affordable level for everyone.

Others believe that if the market returns to a bear market, individual investors will retreat en masse. This may be true for a small number of individual investors who want to make a quick buck, but for most investors, investment freedom and opportunity are just the beginning of a future where they can take control of their own financial freedom and even influence the future of society as a whole.

-- Kim Fournais is the founder and CEO of Saxo Bank