By A StockStudio @ Shutterstock.com
This is a troubling trend. Many of you have been around the block and have seen the mistakes day traders and speculators made during the dotcom bubble. Based on Bloomberg’s reporting, it sounds like a new crop of investors is likely to learn that when you treat the stock market like a casino, the house usually wins. Sarah Ponczek writes:
Back on March 23, it seemed like stocks would never stop falling. Congress was struggling to pass stimulus, coronavirus cases were climbing, futures were pinned to their bottommost tick and $10 trillion in value had vanished.
Meanwhile in Northern Virginia, Nicole Kelleher was opening her very first brokerage account. Little did she know, the S&P 500 was about to surge 30%.
The romance novel writer and administrative aide at George Mason University spread $5,000 across Peloton Interactive Inc., Fitbit Inc., Trivago and Dropbox Inc., among others, on the Robinhood Financial app. Her husband, a restaurant executive, told her she needed some real estate. So Kelleher bought shares of MFA Financial Inc. Five weeks later, the portfolio is up almost 12%.
On their own, Kelleher’s purchases don’t amount to much. But combined with similar decisions by tiny investors around the country, the buying represents a formidable force that has helped the market claw back more than half the ground lost in its fastest bear-market drop. A trio of giant retail brokerages, E*Trade Financial Corp., TD Ameritrade Holding Corp., and Charles Schwab Corp., each saw record sign-ups in the three months ending in March, with much of it coming at the depths of the swoon.
“I’m a complete noob when it comes to stocks,” the mother of high school senior twin boys said while sheltering at home. “It’s not thousands and thousands of dollars that I invested, but it’s a start. We’ll see what happens. I hate to say it, but it’s like gambling, isn’t it?”
There may be something to that. “When the casinos/sport betting closed down, some of that action when to stock markets,” speculated Nicholas Colas, cofounder of DataTrek Research, in a note Wednesday. “Google Trends data supports that idea.”
