Now that the Dow Jones Industrial Average is flirting with all-time highs, retail investors are getting back into the market -- and can still enjoy additional gains, TD Ameritrade executives told the company's annual TD Ameritrade Institutional conference in San Diego on Thursday.
"We don't have them all back yet, but there's no question that retail investor sentiment is improving," CEO Fred Tomczyk told the gathering of registered investment advisers.
He pointed to inflows into equity mutual funds during January, saying that TD Ameritrade traders were net buyers of stocks during the month amid signs that individual investors were returning to the market.
Retail investors are being lured back by optimism that the U.S. economy is improving and that Europe will avoid a major blow up.
But Tomczyk cautioned that the U.S. economic recovery remains fragile — as evidenced by the surprise fourth-quarter contraction — and said the ongoing budget fight in Washington could still undermine growth.
"There's no question people will start to invest," he said, adding that "it's going to take time."
But there are also questions about whether the market can reach new all-time highs.
Tom Bradley, TD Ameritrade's president of retail distribution, told the conference that retail investors don't risk getting in right at the top. "Retail investors will lag, but just by a bit," he said.
There are other longer-term reasons to believe investors will continue to put money into equities.
Tom Nally, TD Ameritrade Institutional president, said that "echo boomers" are starting to amass their own wealth and are inheriting their parents' money. "Gen Y is 75 million to 80 million strong," Nally said, "and their wealth will grow from about $2 trillion today to $28 trillion in 2016."