US Retail Investors Selling Individual Stocks at Fastest Pace Since Pandemic Crash, Shifting from 'Buy-the-Dip' to ETFs

MarketWatch reports that, according to the latest research from Vanda Research, US retail investors are selling individual stocks at the fastest pace since the stock market crash during the COVID-19 pandemic. In contrast to their previous aggressive 'buy-the-dip' behavior, retail investors are now exhibiting a more cautious approach during this market correction.

While retail trading in individual stocks has remained active this year, there has been a clear shift in trading strategies.

Vanda Research's latest report reveals that on Tuesday, US retail investors recorded the largest single-day net sell-off of individual stocks since the pandemic-induced market crash.

With AI-related stocks recently experiencing volatility, US markets have pulled back this month. Vanda has been closely monitoring whether retail investors would return with their usual 'buy-the-dip' behavior. However, so far, there are almost no signs of this happening.

Vanda stated in its report: 'Earlier this week, we questioned whether retail investors were about to return to the market. So far, there are almost no signs that this is happening. On the contrary, retail investors yesterday recorded the largest single-day net sell-off of individual stocks since the pandemic market crash.'

Vanda found that Tuesday's stock sales were primarily concentrated in memory-related stocks, including Micron (MU-US), Sandisk (SNDK-US), Seagate Technology (STX-US), and Western Digital (WDC-US). These four stocks accounted for 88% of the $213 million in net individual stock sell-offs by retail investors on that day.

According to Vanda's data, there have been nine trading days this year where US retail investors showed a net sell-off in individual stocks. In contrast, there were zero such days in 2021, 2024, and 2025, highlighting a stark contrast.

Earlier this year, memory stocks surged amid the AI boom. However, recently, as the broader semiconductor sector has corrected, this hot memory rally has suffered setbacks.

Vanda notes that retail investors remain highly active in individual stock trading this year. From 2026 to date, the average daily trading value in individual stocks by retail investors has reached $15.7 billion, a record high.

Although retail investors are selling individual stocks more aggressively this year, this does not mean they are completely exiting the stock market. Vanda found that retail investors are increasingly favoring ETFs, which offer higher risk diversification, viewing them as a more defensive alternative.

Vanda stated, 'A consistent pattern is now emerging: selling individual stocks and buying large-cap index ETFs.' For example, on Tuesday, retail investors net bought the Roundhill Memory ETF (DRAM), which invests in global memory-related stocks.

Vanda believes retail investors are not leaving the market but are 'becoming more selective.' The report indicates this reflects a significant shift in retail investment behavior. Investors are increasingly willing to reduce exposure to individual stocks while increasing their allocation to ETFs.

Vanda also warns, 'If corporate earnings fall short of expectations, this shift in investment behavior could continue to pressure previously popular momentum stocks.'

Meanwhile, investors will closely watch earnings reports from major tech companies this week. Microsoft (MSFT-US) and Meta (META-US) will release their earnings after the market close on Wednesday, followed by Amazon (AMZN-US) and Apple (AAPL-US) on Thursday.