Investment with a side of guilt
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Illustration: Sarah Grillo/Axios
When we invest in the stock market we're no longer just trying to make good investment decisions; we're engaging in a political act. That's the message to be found between the lines of Public's latest retail investor report.
Why it matters: The retail investors on Public — a stock-market brokerage — are acutely aware of the responsibilities that now seem to come attached to investing in the market. As a result, if they don't live up to those responsibilities (and, whisper it, nearly all of us don't), they can feel like they're hypocrites.
The big picture: Most stock market investors, most of the time, feel a bit of impostor syndrome. They feel they should know more about the market, do more research before investing, and have more clearly delineated investment theses.
- The Public survey is therefore subject to social desirability bias — the tendency of survey respondents to give answers they believe will make them look good.
- In the survey, for instance, an improbable 63% of investors found themselves agreeing that they had increased their "focus on research and diligence" over the past year.
Between the lines: The bias among survey respondents can be very useful if you use their responses as a glimpse into how investors like to think of themselves, more than as a revelation of what they're actually doing.
By the numbers: Voting is seen to be a socially responsible and important thing to do, which explains why 27.3% of Public's investors say that they've participated in at least one proxy vote this year.
- In reality, small investors almost never participate in proxy votes. A definitive study cited by Public found that less than 10% of retail investors participate in proxy votes.
- For the smallest retail investors, defined as individuals holding less than one billionth of all shares (or less than $100 in shares), that percentage falls to below 3%.
Be smart: Fully 54.8% of Public investors say that ESG metrics are important to them when it comes to making investment decisions — despite the fact that to this day such metrics are almost impossible for retail investors to access. (Public's own pages on individual stocks don't report ESG metrics, for instance.)
- 10.2% of Public investors even take the strongly anti-ESG view that ESG metrics are important because "I want to ensure that companies aren't sacrificing financial performance for ESG issues."
- Realistically, however, there's no way for a retail investor to make such a determination, using the Public website or any other readily accessible resource.
The bottom line: A brokerage account now comes with a free guilt trip.
- A large proportion of Americans — or at least Public's investors — don't seem to have got the message that it's perfectly fine to just invest passively and not take an active interest in the stocks you're investing in.
