A graph showing the Apple stock price in a smartphone app.
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Retail investors had a disastrous year in 2025.
Mom-and-pop investors bought at key points of decline this year, driving strong returns as the market climbed to all-time highs. A new generation of retail investors, once considered unsophisticated and easily deceived, is giving competition to the professionals who long rejected them, according to investors and market data analysts interviewed by CNBC.
“Retail is getting smarter and it's getting tougher on the market,” said Mark Malek, head of investments at Siebert Financial. In other words, these investors are really “growing up.”
Individual traders were quicker to buy the decline during market declines earlier in the year, according to JPMorgan Quant analyst Arun Jain, who called it a “successful year” for this group. It was an effective strategy: 2025 is shaping up to be the second-best year for dip buying since at least the early 1990s, according to data released this month from Bespoke Investment Group.
Starting in May, JPMorgan said, these investors shifted their focus from individual stocks to exchange-traded funds. The group was particularly concerned with SPDR Gold Shares (GLD) JPMorgan noted that inflows in 2025 exceeded those of the previous five years combined. The gold-focused ETF has posted a record-breaking gain of more than 65% this year as the precious metal rose to all-time highs.
The result: According to data the bank released earlier this month, retail investors' individual stock portfolios posted higher profit-loss ratios than baskets tied to artificial intelligence and JPMorgan-powered software. Everyday investors' ETF holdings had significantly higher win rates than that SPDR S&P 500 ETF Trust (SPY) And Invesco QQQ Trust (QQQ)the company noted.
Buy “TACO” and the dip
A key driver of their strong performance this year dates back to a week in April that left investors of all sizes on tenterhooks.
Big money came crashing down when President Donald Trump first unveiled his plan for sweeping, high tariffs on most foreign countries on April 2, which he dubbed “Liberation Day.” The S&P 500 briefly fell into bear market territory as institutional investors feared the policy would drive up inflation and weigh on corporate earnings.
But small investors plunged headfirst into the turbulence. They made a record net purchase of more than $3 billion in stocks on April 3, according to market research firm VandaTrack – even though the S&P 500 fell about 5% in the session. The increased buying continued the following day, although the benchmark average fell another 6%.
On April 9, exactly one week after “Liberation Day,” Trump put most of his key duties on hold. Small shareholders were on the ground floor of the S&P 500's 9.5% rise this session. The broad index is up more than 21% since April 2. It is on track to end 2025 up more than 17% after hitting several new intraday and closing records.
“We often talk about retail being a little late to the party,” said Viraj Patel, Vanda’s deputy head of research. “But that was the exact opposite.”
Stock chart iconStock chart icon
S&P 500, year-to-date
At Siebert, Malek said professionals were starting to get nervous as the S&P 500 fell below 5,000 during the tariff-related selloff. However, their retail traders continued to buy until the end of the session, leveraging their previous success in increasing exposure during pullbacks rather than in panic.
Retail investors “were more right about the market and how to react to many of the year's emotionally charged trades,” Malek said. “They were much more precise in their dealings than my colleagues in the institutional sector.”
These traders not only believed in buying on dips, but also benefited from the belief that “TACO trading” would be successful, according to Zhi Da, a finance professor at the University of Notre Dame who studies retail trader activity.
Read more about CNBC's retail investor coverage
This strategy, known in full as “Trump Always Chickens Out,” encourages investors to buy into stocks when White House policy decisions lead to market downturns in anticipation of the policies reversing. On the other hand, institutional partners have been more cautious about circumventing Trump's policies, Da said.
Da admitted that there was some luck involved and that 2025 was an “exception” to the rule. Typically, retail investors buy market declines too late and don't benefit as much on average, he said.
A more “sophisticated” investor
The positive 2025 for retail comes one year after the investment boom among Americans that began during the pandemic. The next severe market downturn will test whether the increased participation will last.
In 2024, more than one in three 25-year-olds have transferred significant amounts from checking to investment accounts since turning 22, according to JPMorgan data released earlier this year. That's up from just 6% of 25-year-olds in 2015.
JPMorgan found that retail flows reached record highs in 2025, up more than 50% from the previous year and about 14% higher than the meme stock boom of early 2021. The share of individual investors in total stock trading climbed this year to highs last seen during this short-squeeze mania four years ago, according to data from a working paper by professors at Chapman University, Boston College and the University of Illinois.
The narrative during the meme stock boom in 2021 – which focused on stocks like GameStop And AMC – was that retailers made simplified investment decisions to “leave it to the man.” Two years later, the sentiment toward these market participants of the meme stock era was captured in a film starring Paul Dano, Pete Davidson, Seth Rogen, and Sebastian Stan called Dumb Money.
Vandas Patel and others said perspectives are changing. Retail investors are taking advantage of expanded access to market research and data — and gaining a better reputation on Wall Street as a result, they said. Retailers have also proven more adept at shopping at lows and are increasingly comparable to larger rivals, Patel said.
“The average retail investor is becoming more sophisticated,” Patel said. “This year was a good example of that.”
A scene from the trailer for the film “Dumb Money” with Paul Dano.
Courtesy: Sony Pictures Entertainment
Of course, there is also a new class of meme stocks OpenDoor was created this year. But Vanda found that in 2025, far more retail investor money has flowed into names like… Nvidia, Tesla And Palantir which has outperformed the market in recent years.
Siebert's Malek said he has found that everyday traders are increasingly focused on longer-term investments, which can save them from panic selling when the market falls. Still, one question remains top of mind for Malek and other investment leaders: What will retail traders do when the stock market finally enters a sustained period of difficulty after several years of big gains?
For now, private investors are taking note of their improved position.
Real estate professional Josh Franklin remembers a decade ago when they were easily written off by major investors. The 28-year-old Tampa resident who has invested in stocks like Robinhood and Palantir over the years, spending dozens of hours a week studying the market, now sees the little guy as a central part of the story.
“Back then, no one really cared about retail. They thought retail was dumb money,” Franklin said. “Retail is now at the top of the charts, so to speak.”