If Individual Investors Are Heading for the Exits, Why are Discount Brokerage Stocks So Pricey?
Maybe it was the financial crisis, or maybe it was the constant flood of stories about investors pulling money out of the stock market. But here’s another one: investors have pulled money out of stock funds for more than a year, the first time since 1981, the Wall Street Journal reports.
Granted, their stocks have seen better days.
Moreover online brokers make money by charging interest on brokerage account balances. When rates are near zero for years on end, that squeezes their margins. Schwab has been waiving management fees on some Schwab-sponsored money market fees to keep client returns positive.
But there’s a bull case to make for these stops, namely that pension-less investors will return to the market and need an entry point. In fact, some of these brokers are trading for a higher multiple than Apple (AAPL).
Investors haven’t ditched all stocks, apparently.