Millions of amateur investors flocked to the stock market during the pandemic, some strangely, some aggressively, some determined to teach wall street bigwigs a lesson, and almost a bull market for most of two years. did not help earn money while riding. ,
Now you may have to fight the bear.
“It’s certainly not that easy to do business in this market,” said shelley hellman, 47, a former optometrist from texas who began actively investing in April 2020 while isolated from her family.
tracking stock movements on an ipad mini in his bedroom, he made big profits as the market rose. Within a few months, she was considering turning day trading into a full-time job. but since the s&p 500 peaked on jan 1. 3, making a profit has become difficult.
“Sometimes I’m glad I haven’t been red for years,” she said.
a sharp five-month slide has left the s&p 500 vulnerable to a bear market: a drop of 20 percent or more from its most recent peak, which is seen as a psychological marker of investors’ bearish outlook on the economy . the index is down more than 18% from its January 3 high, including a 4% drop on Wednesday.
In response, many of the roughly 20 million fans who started trading in the last two years, whether they’re bored sports bettors or meme stock buffs who piled into gamestop, hit the brakes, or moved their wallets to more defensive positions. scrambled to alter.
s&p global market intelligence, which analyzed april data from charles schwab and interactive brokers, said retail trading activity was down 20 percent compared to the meme stock frenzy of january and february 2021 Popular retail brokers report fewer active users: The likes of Robinhood, a number of hobbyists who jumped in early in the pandemic, said last month that they had 15.9 million active users in March, up 10 percent from a year ago. year and last year 8 percent less than at the end.
The recent drop, the company said, was “linked to users with low balances, who are less invested in the current market environment.”
The mood has also cooled on reddit forums like wallstreetbets. In the heat of the bull market, unstoppable traders joke that stocks only went up. But the irrational enthusiasm has given way to darker humor: a recent post included an image of a death angel striking low and bullish interest rates on the stock market.
jonathan colon exited when the market started to recover. He put $3,000 into a Robinhood account last June and sold it all earlier this year when the stock crashed in January. cashed out at a loss of $100.
“It was like when you hit your hand several times as a child and you learn not to go from one side to the other,” he said.
mr. Colon, 33, who will graduate from Brooklyn College this month with a finance degree, was inspired to invest in a stock market competition that one of his professors offered as extra credit in March of last year. managing and trading a fake $1 million portfolio, he sought out companies that were selling too aggressively, giving him a cheap buy, or trading above their normal range, giving him a short sale. candidates for.
A few months later, he started investing his own money, but had trouble replicating the returns on his fake portfolio. for example, some stocks were not available to sell short, and trading so frequently was expensive. Although there was no commission to pay, the bid-ask spread (the small difference between the highest price a buyer was willing to pay and the lowest the seller was willing to accept) cost him individual shares. .
by January, some of her classes had resumed in person, and with them was her arduous journey from the bronx. Instead of trading for an hour every morning, she cut it down to twice a week. the market was also becoming more volatile and it was becoming more and more difficult to maintain his position. he always used stop-loss orders (instructions to sell when the stock had dropped below a certain price) to avoid a catastrophic drop. but with the steady decline, he went bankrupt.
“Just when you think it won’t go down, it will go down,” he said. With less time on hand and more volatility in the market, she sold everything “for safety reasons,” she said.
While the stampede to open new brokerage accounts is over, retail trading activity remains well above pre-pandemic levels, a testament to the sheer number of people who have turned stock trading into a normal life as the coronavirus spreads. it gave. According to estimates from JMP Securities, the retail brokerage opened two to three times as many accounts in 2020 as it did a year ago, a pace that accelerated in the first half of 2021.
Despite the recent market downturn, retail traders should not panic, said Thomas Mason, senior research analyst at S&P Global Market Intelligence. “They’re moving from high-risk growth stocks to low-risk investments,” he said.
Although their tastes may have changed, they are a segment of the business population that still shows an appetite: In late April, td ameritrade, part of charles schwab, said its retail clients were still buying more shares of the what they were based on its Investor Movement Index, which measures the behavior and sentiment of retail investors based on a sample of accounts that have completed trades in the last month. the firm said its interests are shifting to less volatile names and more stable holdings, such as short-dated bonds.
ms hellman, who became active in the early days of the pandemic, said she was sticking with it, learning more and refining her approach.
he often wakes up at 3 am. m. And he turns on CNBC to map out his strategy for the day, which includes studying stock price movements, a process he likened to learning to catch a baseball: watching its arc. , then trying to figure out the physics of where it would land. “That’s what I’m doing with price and quantity,” she said.
A longtime buy-and-hold investor, he started with about $50,000, money that came from stock in Conocophillips that he inherited in 2014 after the death of his grandfather, a propane salesman. His approach has become increasingly complex over the past two years: Last fall, he took a big position in an exchange-traded fund that bets against the price of natural gas, which is fueled by the encroachment of energy markets from Ukraine from Russia. she has increased in
“Natural gas is going up because of the war at a time when it’s seasonally low, it didn’t help me much,” he said.
still, he’s more than quintupled his money since the start of 2020, riding on the strength of a rally in which the s&p 500 is up almost 80 percent since bottoming out in march 2020, even that even with his recent reject.
Experiencing a loss after a period of gains can be instructive, said Dan Egan, vice president of behavioral finance and investment for improvement, which creates and manages a diversified portfolio of low-cost funds and provides financial planning services. .
“If you have a good initial investment experience, you see that’s part of it, you’ll be fine,” he said. “We have bumps and bruises that you need to know what pain feels like,” she said.
eric lipchus, 40, has felt a lot of pain in his nearly two decades of full-time trading: he has stand-ins for lehman brothers, the investment bank that floundered during the 2008-2009 financial crisis. Before, he had watched his older brother and his father dabble in the markets during the dot-com boom and bust.
“I’ve been on a roller coaster,” he said. “I’ve been making a lot of money this year, but it’s been up and down. It looks like it could be a tough year, not as backwards as in previous years.”
The challenging circumstances investors now face can quickly become stressful, said mr. lipchus. Right now, he’s putting half his wallet in cash and he’s going fishing in a couple of weeks to clear his head.