Schwab Trading Activity Index™ (STAX)

Monthly summary: STAX vs. S&P 500®

Introducing the Schwab Trading Activity Index, or the STAX. A proprietary, behavior-based index designed to indicate the sentiment of retail investors.

About the STAX

The Schwab Trading Activity Index, or the STAX, is a proprietary, behavior-based index that is designed to indicate the sentiment of individual investors' portfolios by measuring what investors have actually been doing, and how they were actually positioned in the markets.

The STAX does this by analyzing aggregated data including holdings/positions, trading activity, and more from a sample of our many millions of funded retail client accounts.

No, and the sample changes from month to month. In order to calculate a score measuring client behavior, it's best to draw from actual client account activity over that period.

So each month, we draw a sample from our millions of funded client accounts that include all retail (individual, self-directed) investor clients who have traded at least once in that time period. Please note: Client account activity is only compiled in aggregate in order to protect the privacy of any individual account.

As one of the leading providers of financial services in the U.S., Schwab is often asked by financial news media, investment analysts, and others for insight into the mood and behavior of individual investors. Before the introduction of the STAX, financial institutions have largely relied on opinion surveys—which measure what investors are thinking or what they're saying—to provide this information.

With millions of funded client accounts spanning investors of all ages, account sizes, and experience levels, we have a unique opportunity to offer quantitative, behavior-based information that can better reflect what individual investors are actually doing. As a result, when it's combined with opinion-based research, the STAX can provide a more complete snapshot of retail investor sentiment than standard surveys can provide.

We create a monthly sample from all of our retail (individual, self-directed) investor clients who have traded recently. Then we use a proprietary methodology based on the holdings and positions in each portfolio to create an individual score. The process is similar to beta weighting (a method of analysis which considers the percentage of each position in a portfolio to create a view of profit and risk), but instead relies on our proprietary models. The median of the individual scores is the overall, or official, STAX.

The overall STAX score is democratic: A large portfolio and a small portfolio will have the same influence on the score. In other words, each client account in the sample is treated equally—whether the account has $2,000 or $2 million in it.

It's best to review STAX trends over time, rather than focusing just on one month's score. If a score increases month over month, that likely means that investors are getting more bullish. If a score decreases month over month, that can either mean that investors are becoming bearish, or that they are less bullish than before. There are no defined bullish/bearish thresholds for the index. Scores should be viewed relative to other periods—the more scores you consider, the more likely you are to see trends that can be compared to other indices or market dynamics.

For example: If the index decreased from one month to the next after hitting a new high, that may be because investors are taking profits and reducing exposure to the market. But relative to other periods, the score is still high—indicating that portfolios are still bullish.

While the STAX can help provide insight into individual investor behavior, it cannot predict the direction of the market. It provides a historical snapshot of what individual investors were doing within their portfolios. This snapshot, when viewed over time, can be used to suggest a bullish or bearish sentiment on the part of retail investors.

Investors shouldn't rely solely on one indicator or study to make investing decisions. Instead, it's a good idea to monitor a variety of indicators and studies when considering an investing decision.

The STAX is meant to be viewed at an aggregated level. While we do look at certain broad demographic trends, such as the score by age or generation, individual scores are not available. Millennial insights, for example, are generally included in the monthly press release announcing each STAX report.

The STAX is updated monthly.