Noah's Arc 2025 Q2 Newsletter
The Changing Retail Investor
Executive Summary
The Changing Retail Investor: Retail investing has surged in importance and is a permanent phenomenon, changing market dynamics.
Rise of Retail and Its Legacy: Several fascinating factors like technological advances led to the rise of retail investing. Retail investing has increased the market’s liquidity, but also volatility, shown through the extreme price swings. Volatility stayed elevated even during market highs.
Retail Challenges: Retail trading brings many challenges like information asymmetry, particularly the quality of information retail investors have access to versus institutional investors.
Introducing Connect Trade: I’m proud to announce Connect Trade, a fintech platform that consolidates information from third party apps to make trading easier and embedded.
Personal Note: I’ve made some big changes rounding out my 4th year of writing research and managing money.
The Changing Retail Investor
For those of you who have been reading this newsletter since it started 4 years ago, you’ll know I love investing. Personally, I’ve been investing since I was 12.
But outside running Noah’s Arc (a firm I started) and a brief internship at Citi bank, I have never worked on Wall Street, nor would I say I really have been a “professional investor.” Yes I have been fortunate to manage money for the dozen+ LPs Noah’s Arc has had, I am not sure I would call myself a professional investing.
Really, I have been investing like a retail investor -reading retail research reports, writing research for retail investing websites like Seeking Alpha, and allocating the funds in Noah’s Arc like a retail investor would.
For most of the history of stock market investing, investing like a “retail investor” was an insult, not a complement. Wall Street and institutional investors have been called the “smart money” while retail investors have been the “dumb money.”
This is changing.
By 2023, retail investors accounted for about a quarter of U.S. equity trading volume, up from just 10-15% about a decade ago. Research from Gallup finds that 61% of American adults now owned stock, which was the highest in nearly two decades.
In essence, retail flows are moving the markets, and retail investment research in many cases now outpaces even research from “smart money” institutions.
Take my own story. I like to invest. I like staring at stocks all day. I have an undergraduate degree in business, but I am not a trained investor. I am not “smart money.” I’m someone who is curious about investing and likes to read a lot.
I’ve been writing my research on Seeking Alpha now for almost 2 years. When you benchmark my research against the thousands of Wall Street analysts, hedge funds, and “smart money” you’ll find something interesting (and this is not because I am some gifted stock picker).
Anyone who knew my investing skills in high school would know my investing skills were anything but “gifted.” Quite the opposite frankly.
Nonetheless, the research we have written with Noah’s Arc is now in the top 2% of all research globally. This research beats out thousands of investment analysts, hedge funds, and “smart money.”
The reason this research does so well is because the way retail investors invest is changing.
Retail investors are often focusing on taking outsized positions in consumer (or cult) stocks they love, with an innate appreciation for the companies they invest in that sell side analysts are missing.
My research doing well is not about me. It's about a new way retail is investing. This method has survived COVID, the 2022 drawdown, and now the volatility over the last 18 months.
Retail investors now have access to more investment products, content, and tools than they ever have had before. Retail investors have the tools and investment products to do really well. Just look at Robinhood’s Token event today (I encourage you to watch at least parts of the livestream recording).
For the first time. Robinhood customers can now buy cryptocurrency tokens that act as wrappers to shares in leading private companies like OpenAI and SpaceX.
Investments previously reserved for ultrawealthy private investors, large funds, and the “smart money” are now accessible to retail.
This is gamechanging. But this evolution is not perfect, nor is it complete. Retail investors still need more tools, and more connections in order to sharpen their investments.
Rise of Retail and Its Legacy
Fintech innovations like zero-commission trading and user-friendly mobile apps only made investing more accessible, with Schwab’s zero commission trading during 2019 and Robinhood’s offering of fractional shares and low minimum balances. Social media platforms like Reddit’s Wallstreetbets have also added fuel to this fire, offering countless retail strategies and even playing a huge role in the rally of Gamestop, showcasing the powerful coordination that’s possible among retail investors in influencing the market. I believe that the combination of these forces have led to market democratization and liquidity, but also volatility and price inefficiency driven by “noise trading.”
Retail Challenges
Despite the uptick in retail trading activity over these past few years, retail investors continue to face challenges. While the access to data has improved considerably over these couple of years by many retail brokerage apps, retail traders still typically only research 6 minutes before executing a trade. There are still plenty of consequences to this.
A well known case in 2020 involved a 20 year old Robinhood user dabbling in options waking up to what he mistakenly believed was $730,000 in losses and taking his own life.
In essence, retail needs to connect more tools to their brokerage accounts so they can do more with their analysis (and avoid costly mistakes). The problem is, connecting good tools to their brokerage accounts so they can do better analysis is hard. Coding to multiple brokers is a pain (and this is before tool platforms like Seeking Alpha, TipRanks, or Yahoo Finance get through compliance).
This is where Connect Trade comes in.
Introducing Connect Trade
In essence, Connect Trade is an API company. We help fintech tools embed broker functionality inside their apps/platform without becoming a stockbroker. Fintechs code to us once and get access to multiple leading US brokers at the same time.
With over 100 million+ U.S. brokerage accounts and more than 150 million globally, we really think Connect Trade has a strong addressable market. As more of retail gets serious about trading, they’ll need better tools to help do investment research. These tools need to connect to brokerage accounts to pull account data, trade history, and help clients execute orders back to their brokerage accounts.
Connecting to brokers one by one is hard. Much like our diagram above, we can help fintech tools (see the stock charting app/tool on the iPhone) connect to brokerage accounts wherever their users custody their assets.
I’m excited to say that we already have nearly a dozen customers including option trading apps, quant-backtesting providers, and a stockbroker paying for the APIs we’ve built to help them enable trading in more places.
We’re still the earliest definition of early for a startup, but we are really excited with what customers are telling us.
Personal Note
Winding Down The Fund
Connect Trade is in full swing. Jim (my co-founder) and I are really excited about what we’ve got.
Doing something really well means going all in and focusing on one thing at a time. I wish I had learned this lesson a long time ago. This is so obvious in hindsight.
With this, I wound down the fund (Noahs Arc Capital Partners, LP 1) at the end of March. Investors have their funds back, and some have actually rolled their money into Connect Trade. It feels really good to make someone money and for them to trust you to roll it into your next project.
Noah’s Arc will still be a research business (I like writing).
Moving to DC
If you asked me two years ago if I would ever leave Michigan I would’ve said “zero shot.”
Like a lot of people who leave where they grew up, they leave either because of work, education, or (and this is the big one), their potential spouse.
I fall into this third category. We met in Ann Arbor (like a lot of Umich couples do). She is from DC. I’ll be moving out there at the end of September.
I had a lot of friends who left Michigan when they graduated undergrad because they “felt like there is no opportunity here.” Ironically, while I am leaving, I couldn’t disagree more.
Michigan is actually a really great place to build a business, raise money, or to pursue your own venture. I know people who have been really successful running a fund in Michigan (shoutout to William), building great tech startups (Jonah and Blake at MeetYourClass), or building a great career working a normal job.
What I am trying to say is that where you live should really be a personal decision. I think this decision shouldn’t be as much about work or your career. Maybe I am naive, but I think you can find opportunities in most places (in the US at least).
To everyone who has been reading this newsletter for the last 4 years, thank you. I plan to keep sharing what I think (even though what I now do full time has changed and where I live is different).
I still like to write my 2 cents. I am thankful you are here to read it.
Noah