You may have heard around the traps that stocks are going on the cheap, and while there may be some truth to that, it’s important to get stuck into some research before you plan on doing a Leo in Wolf of Wall Street.
In the midst of a global pandemic, financial wellbeing has never been more important, so we spoke with Robert Francis, stock market guru and Managing Director of investing platform eToro, to find out if now is a good time to try your hand at stock trading.
Right now, stocks are as cheap as they've been in a while because of the COVID-19 pandemic. What's happened exactly?
The coronavirus pandemic has had an enormous impact on stock markets around the world. Since late February, share markets in Australia, the US and the UK have fallen by around 30% amid unprecedented volatility.
With countries closing borders and businesses in response to the growing health threat, analysts predict we're in the early stages of an unfolding global recession.
However, while shareholders have been hit by heavy losses, many will be using the market crash to keep an eye out for new investing opportunities while stock prices are low.
So, should people invest?
With stock prices falling rapidly, it could be a good opportunity to enter the market with less capital, especially if you use a platform that offers fractional shares.
While a lot of the market has experienced a decline, some areas are climbing and delivering returns. Stocks in the healthcare sector, the work-from-home economy, soap and disinfectant manufacturers, and even video games and home entertainment are seen as opportunities by some.
Are there any do's, don'ts or watch-outs in the stock market that people should be aware of right now?
Invest in what you know. All of the world’s best investors invest in companies they know well or are passionate about. For example, if you love tech, you may decide you want to buy stocks in Apple or Microsoft. Or, if fashion is more your thing, then you might want to consider ASOS or H&M. But of course, do your homework on them first.
Start small, It’s a common misconception that you need a lot of money to make investing worthwhile. If you start small but invest regularly, you’ll be surprised how quickly your pot will build up.
If you don’t quite feel ready to invest, why not start with a virtual account? That way you can play around with your portfolio and find out what works best for you.
Don’t put all of your eggs in one basket. Investing $1K across 10 companies is much safer than investing $1K in one.
Think long-term. If you’re chopping and changing your investments all the time, then you won’t give your picks a chance to achieve their potential, meaning you could miss out on good profits. Depending on the investment platform, you could also incur extra fees.
And what should be considered when selling down the line?
Generally, to make a profit, an investor will buy stocks at low prices and sell when the stock’s price significantly increases. Given we’re in the midst of an economic downturn, it would be expected that in the long term, market prices will regain their lost value.
Due to the decline caused by Covid-19, many industries, such as airlines, retail, and hospitality are at a standstill. Until industries are able to begin operating again, there’s reasonable uncertainty around when we can expect the market to rebound.
For those looking to invest long-term, investors might want to consider buying stocks while they’re low and hold stocks until the market regains traction. This may mean holding onto a stock for a minimum of 6-12 months.
Are THERE Any tips or tricks worth considering in general, and during the COVID-19 pandemic?
Always set realistic stop losses and take limits that are aligned with your own risk appetite. Global markets operate overnight, so you may not be awake for major market movements.
Do background research on different companies and stocks, and keep up to date with news on the stock market to find out the trends.
Adopt an investment mindset. Stock markets aren’t a get rich quick scheme so people should adopt a long-term view when it comes to their investment approach.
Only invest what you can afford to lose, especially during this global pandemic when industries are so volatile.
Understand that regardless of market conditions, investing in the stock market can be risky.
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