Dear reader,
If you have been in the stock market or have been following the market for a while you have seen probably a lot of different things with regards to stocks, manipulation and events that don't make any sense. This last week was no different. There is a new kid on the block with regards to stocks and investing. While investing and trading stocks was an old man's game and for people on Wall street, there is a growing force of millennials taking over the scene.
For several years I have been following the stock market and since the last few years I have been actively investing, trading and searching different markets. Since the last year many millennials have been investing and trading on easy to access platforms. I know this because many of my friends and colleagues have been joining the market in the past year. This week has been a strange week for the different markets. This week I am going to look at why millennials are entering the stock market, what this past week has been for influence on the market and how it will impact the future and finally I am going to look at what investing in the stock market can do for your success as a millennial.
Disclosure:
I want to fully disclose that I am not a financial adviser or planner. I am an investor for my personal future and with every investment there is a risk involved. I don't recommend any stocks or investments and before you start investing do your own research about the different companies and products that brokers offer.
Millennials in the stock market:
Many millennials are entering the stock market since last year. With the markets crashing last March and people seeing an opportunity to take advantage of the down turn that the market has had. For millennials the financial possibilities are very slim. With housing prices going crazy and rental prices so high it is the only option to make sure that you can have the life of your dreams is to make your money work for you.
There are many influences for millennials that trigger them to start investing. You cannot get by on YouTube without ads and videos "telling you that you can get rich by trading stocks." While there is a possibility to get rich in the stock market often this is not the case for most people. Also these people on YouTube want you to buy their courses and watch their videos so that they will get rich and profit from the millennial hype in the stock market. Next to social media there is another social part to it. FOMO, Fear Of Missing Out. Many of their friends are in, talk about it and even make some money trading stocks, so why are you not doing it yet? Finally millennials have a lot of spare time at the moment. So why not invest your time and money into something that produces more money and can build your own financial future.
There is another great reason why many millennials are entering the stock market and that it can cost you nothing. With broker platforms such as Robinhood offering zero to nun cost for trading and you can get in with just a few dollars it has become attractive and easy for many people to get started. Also there are no financial requirements, tests of knowledge of investment instruments or any kind of financial knowledge. Just buy this and that stock, hope it goes up and make a profit when you do.
The financial markets in the past week:
Stock market, Cryptocurrency, social media, big brokers, market manipulation and no regulations. This basically sums up the past week of investing for me. It all started that a major brokerage house issued a short portion (a short position is that you place a bet that the stock will go down in the future) of 120% on a company named Game Stop (ticker symbol: GME) The maximum that you can short a stock is 100% so what happened with the short position is not realistic to the market conditions.
On Reddit, the world's largest social media forum there is a group called Wallstreetbets. This group contains over 4 million members worldwide. They share their investment strategies, discuss investment topics and share information about different stocks. Since the group heard of the short position they encouraged all their users to hype up the Game Stop stock and some others with large short positions. What happened is that these stocks took off and turned profits in the hundreds of percentages. They did this so that the big brokers will lose their short positions and lose a lot and I mean a lot of money.
The markets where all over the place, it was one big mess. Everybody was blaming each other and there was no sense to be made again. By calling out Robinhood for these trades and ordering them to shut down. The market was being manipulated, but not in the way that most people would have expected but the complete opposite way. Instead of big brokers or Wall Street manipulating the market it was the people standing up for the unfair positions of the large brokers and how they can "profit" from a single stock.
After different regulations were set in by Robinhood the group set its focus on Cryptocurrency. They hyped up smaller "coins" so they would blow up with one coin even going up 1100% in 24 hours. The last few days I have been listening to both side of the story. Some want to have more regulations and control on the market, others believe that this is a free market and no government or regulatory body should put restrictions on capitalism. What would happen is to be continued..!!
Successful investing in the stock market for millennials:
The first lesson is don't listen to people on YouTube to buy a specific stock. Use YouTube wise to find people that can educate you to invest in the stock market. There are plenty of people that have great experience and are willing to teach you what to look for in a stock. All the other people just want you to watch their video. A video titled: Buy these stocks and you will be rich, is just click bait to get you to watch their video. So if you do watch videos on YouTube take them with a grain of salt.
The second lesson is know where you are investing. What kind of broker are you investing with, what are the costs? Even with zero to nun cost there is always a reason why that is. So do your homework on where you are going to invest. If you are in it for the long run then it must be a reliable broker that will be around and that does not add any additional extra costs at the end.
The third lesson is always do your own research, even if that person on YouTube or your best friends says this stock will make you a millionaire, you have to do your own research. A few simple ways to do your own research is by visiting the company's website, doing some Google searches for the company, reading their quarterly and annual reports and finally looking at the company's financials. Don't let the price or other people influence you to buy a stock you don't know anything about.
The fourth lesson is don't follow the crowd. When something is being hyped and gains are made that are too good to be true then often it is. If everyone is jumping off the same cliff are you going to follow? The best thing to do is to look at things no one is watching at the moment. That are undervalued and that have great solid returns in the future.
What is next? I don't know what the markets would do next week. All I know is that this is the beginning of a new era in finance and investing. With more and more people joining everyday my short term prediction is that stocks will go up but not for long. Because of the amount of people getting in and the markets being at the all time highs while the world is dealing with the fourth largest pandemic in history I can't believe that this can go on forever. So if you are interested in investing make sure you understand the market and don't by the hype.
Financial education is very important, I don't want you to make the same mistake as most people do. There is a way to get rich or financial freedom from investing but it requires time, hard work and staying focused on your plan. I enjoy investing, talking to other people about it and even sharing some of the knowledge that I got from learning to invest myself. If you like to read and more about investing let me know in the comments and I am glad to do it.
I hope you enjoyed this week's blog.
Thank you for reading and see you next week.
Franklin, Moments 2 Success
Photo by Clay Banks on Unsplash
Photo by Patrick Weissenberger on Unsplash
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