Why you shouldn't rely on Google to learn how to trade
As a nation, the current coronavirus climate has seen many Australians adjust to a new reality in how we live. There is one thing, however, that hasn't changed and that is how retail investors continue to walk a dangerous tightrope when it comes to trading the stock market.
This week, ASIC released a report highlighting its concerns about the trading activity of retail investors during COVID-19 and the statistics were quite alarming.
In reading the report, it is easy to see why retail investors are blindly walking towards a cliff face blissfully unaware of the dangers they are placing on themselves.
Throughout March, the Australian stock market was extremely volatile, yet ASIC indicated that new account openings for retail investors were up 3.4 times on previous levels in addition to a marked increase in the number of reactivated dormant accounts.
ASIC also reported that there was a sharp increase in retail investors trading short-term highly leveraged markets, such as contracts for difference (CFDs). Unfortunately, they also noted that a significant number of retail investors were getting it wrong with net losses in one week amounting to $234 million dollars.
One of the most concerning issues raised in the report was how people were placing ‘good till cancelled’ orders, which is a very inappropriate way to place orders in a volatile market.
As I said last week, it is common to find around 50 per cent of adult Australians believe they are very knowledgeable or somewhat knowledgeable when it comes to investing in shares, however, ASIC’s report proves otherwise.
While many believe CFDs and Forex are a great way to make short-term profits, mistakenly in a volatile market it is a way for the majority to lose most, if not all of their hard earned savings.
Unfortunately, what many investors fail to realise is the enormous risk they place on themselves when trading without a proper education.
Just like Doctor Google is bad for your health, the University of Google in the stock market is equally as dangerous, as it gives wanna-be investors a false sense of security believing they know what they are doing when, in reality, they don’t, as highlighted by ASIC’s report.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au