What it is:
How it works/Example:
Typically, Mrs. Watanabe traders are indeed women, and in the early 2000s they began trading in the currency markets in response to low interest rates in Japan. Some analysts believe their activities helped the currency markets because they timed the markets well.
Retail generally occurs through four channels: individual investors, retail brokers (who act at the direction of these individuals), managed accounts (whereby the account manager makes the buy and sell decisions for the individual), and clubs (groups of people who pool their money to make ). These investors frequently consult the financial media (especially via the Internet) for information and ideas, and they usually hold their investments for a long time.
Why it matters:
Retail investors make smaller trades (and therefore pay higher commissions) than institutional investors, and they tend to trade less frequently than institutional investors. However, the widening use of online trading and easier access to financial information has increased the size of Mrs. Watanabe and retail investors all over the world in recent years.
Retail investors such as Mrs. Watanabe usually have less influence on company decisions than institutional owners do, because retail investors hold relatively small positions. Also, they often do not have access to the management and boards of companies the way many institutional investors do. For this reason, some retail investors may follow the leads of institutional investors because they regard institutional ownership of a security as a sign of approval.