Comparative analysis of returns and risks of investment instruments available to individuals in the context of digital transformation of the financial market

Abstract

The digital transformation of the financial market has radically transformed the landscape of investment opportunities for individuals, expanding access to mobile brokerage platforms, automated recommendation systems, crowdfunding mechanisms, and tokenized assets, which has shaped a fundamentally new ecosystem of retail investment amid the persisting gap between technological innovations and the level of financial literacy of the population. As a result, the phenomenon of the digital retail investor emerges, whose behavior differs from the rational models of classical portfolio theory by a pronounced tendency toward frequent transactions, an orientation toward short-term speculative strategies, amplified by the gamification of interfaces and the influence of social networks. This leads to a significant lag of the median realized return of brokerage accounts behind market benchmarks and to mass disappointment among participants, particularly evident after periods of low interest rates. A comparative assessment of eight key asset classes, including bank deposits, government and corporate bonds, shares of Russian issuers, equity mutual funds, investments in US dollars and euros, as well as cryptocurrencies using the example of bitcoin, over the period 2019-2024, covering phases of the pandemic, sharp changes in monetary policy, and geopolitical shocks, reveals wide variation in nominal and real returns, volatility, maximum drawdown, Sharpe ratio, and coefficient of variation. The extreme nominal indicators of cryptoassets, reaching more than sixty percent per annum, are accompanied by volatility of about seventy-five percent and drawdowns exceeding seventy percent, making them unsuitable for most mass investors, whereas corporate bonds demonstrate an optimal risk-adjusted ratio with a positive Sharpe ratio, moderate drawdown within twelve percent, and stability superior to that of government bonds and deposits, whose real returns often turn out to be negative after accounting for inflation. Tax parameters, including benefits of individual investment accounts, substantially adjust the effective return, increasing the attractiveness of exchange-traded instruments, while the matrix of pairwise correlations emphasizes the pronounced diversification potential of combining stocks with currency positions due to negative relationships, although during crisis intervals a convergence of coefficients is observed, weakening the protective properties and requiring additional liquidity buffers. Digitalization, by reducing transaction costs and entry barriers, simultaneously generates new technological, operational, and behavioral risks, including algorithmic failures, media-driven manipulations, and hidden order routing costs, which intensifies systemic pressure on unqualified participants and actualizes the need to rethink traditional asset pricing models in light of the changed market structure. The obtained results illustrate the absence of universal superiority of any asset class, emphasizing the compromise nature of each instrument in terms of liquidity, tax efficiency, and psychological tolerance to drawdowns, and contribute to the formation of informed approaches to portfolio construction oriented toward a long-term horizon, systematic investing, and minimization of behavioral biases. This abstract provides the opportunity to establish the main content of the work, determine its relevance for theoretical research in the field of behavioral finance and the digital economy, as well as the practical development of model portfolios and regulatory measures for investor protection, thereby allowing specialists and automated information systems to make an informed decision on referring to the full text for in-depth familiarization with the quantitative relationships and interpretations in the context of the transforming Russian financial market.