[ by Howard Haykin ]

Shares of Schwab, TD Ameritrade and E*Trade have climbed 38% on average in 2013, beating the S&P 500 Index by 23%  - the most since 2003 -  indicating that small investors are joining the 4-year bull market even after U.S. stocks suffered their biggest losses in 6 months. 

Adding 'fuel to the fire', Schwab and its peers are eclipsing the returns in bigger named financial shares, like Goldman Sachs and Bank of America, according to data compiled by Bloomberg.  The last times that happened, equity mutual funds received about $91 billion, 24% more than the annual average in the 2 decades before the financial crisis, the data show.

How Bulls and Bears Read the Numbers.   Obviously at opposite ends of the poll. 

• Bulls say a rally in brokers that serve private investors means individuals are preparing to embrace shares after they pulled almost $400 billion from stock funds in the last 4 years.
• Bears say buying by individuals who missed the rally shows gains are close to peaking as another pool of untapped demand gets absorbed.

“It says something about an improvement of confidence among our biggest sector of the economy, retail investors and households,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees more than $340 billion, said in a phone interview. “When the retail investor finally gets more confident about the future, flows follow.”

• Schwab (SCHW), the San Francisco-based brokerage ...  has climbed 40%  in 2013, including a 24% rally since 5/1 that is the 5th-biggest in the S&P 500.  SCHW had 6.1 million retail accounts as of 3/31/13.
• TD Ameritrade, based in Omaha, NE, is up 43%. 

By contrast,

• Goldman Sachs gained 30% in 2013 amid concerns about Dodd-Frank regulations, and
• Bank of America is up 15 percent and
• the KBW Bank Index (BKX) of 24 lenders’ stocks rallied 20% this year.

For further details, go to:   [ Bloomberg, 6/10/13 ].