Get on the Waiting List For our No.1 Stock Suggestion!

    I recently heard a quip that discount brokerage apps are the Pokémon Go of 2020. That’s pretty funny until you realize that it’s actually true. Too many neophyte investors are treating stock trading as if it’s a game. So, what’s the endgame?

    If anybody loses, it won’t be the institutional investors. They’re trained to buy whatever the retail traders are selling, and that strategy tends to work out well. Thus, the amateurs tend to panic-sell at the bottom and start buying at much higher prices, while the smart money does the complete opposite.

    The onset of the coronavirus only exacerbated this trend. Stuck at home, the amateurs took to their phones and laptops and started trading out of boredom, which is one of the worst things you can do if you actually want to make money.

    But here’s the thing: since the market bottomed out in March, amateur investors haven’t been punished for making poor choices. Purposely misspelling stocks as “stonks,” braggarts on Reddit are claiming with a straight face that “stonks only go up.”

    Since March of this year, and since March of 2009 (coincidentally enough), they’ve been mostly right in saying that stocks only go up. It’s really only been a handful of tech stocks that have propelled the markets relentlessly higher, but index fund investors don’t feel how lopsided those indexes really are.

    Courtesy: Genevieve Roch-Decter

    The chart above illustrates how trading volumes have gone parabolic in 2020. Retail investors haven’t been punished (yet) for being bad stock pickers because they’re piling into the same names, thereby pushing the share prices up irrespective of whether the companies are actually profitable or not.

    It’s a weird scene, watching traders furiously bidding up the share prices of bankrupt companies like Hertz or Whiting Petroleum, or scandal-plagued companies like Nikola or Luckin Coffee. Or else, they’re grabbing shares of brand-new IPO’s like DoorDash or Airbnb even after the stock price doubled on the first day of trading.

    93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.

    Wealth Education and Investment Principles Are Hidden From Public Database On Purpose!

    Build The Knowledge Base To Set Yourself Up For A Wealthy Retirement and Leverage The Relationships We Are Forming With Proven Small-Cap Management Teams To Hit Grand-Slams!

      Sometimes I’m actually tempted to buy these stocks simply based on the “greater fool theory,” meaning that I’d be a fool to buy the stock but I know I’ll be able to sell it at a higher price to some greater fool. I don’t actually use this as a strategy, but it’s crossed my mind.

      To make it even worse, they’ve recently discovered riskier and more advanced trading instruments like call options and triple-leveraged ETF’s. It’s starting to look more and more like early 2000, when hardly anyone thought that dot-com stocks were capable of crashing.

      Price-to-Sales Ratio of U.S. Growth Stocks. Courtesy: GMO

      Actually, depending on how we measure it, the current situation could actually be worse than it was in 2000. While value stocks have been all but ignored this year, the price-to-sales ratios of so-called growth stocks have catapulted past the most euphoric peak of the dot-com era.

      So, where does this leave informed, clear-headed investors like you and me? Sure, you might be tempted to jump on the retail-frenzy bandwagon now, since it feels like the inmates are running the asylum and there’s no point in trying to trade against the madness of the crowds.

      You can give into the irrationality if you so desire, but I certainly wouldn’t recommend it. The worst possible position for an investor is to be the last one to jump on a late-stage trend. And always remember, markets go down much faster than they go up.

      Instead, you might consider sticking to the same principles that served your father and grandfather well: think long-term, invest in companies rather than “stonks,” and be wary of crowds as they’re eager to leap but disinclined to look first.

      Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!

      Protect Yourself Now, By Building A Fully-Hedged Financial Fortress!

        Disclaimer/Disclosure:
        Legal Notice: No matter how good an investment sounds, and no mater who is selling it, make sure you’re dealing with a registered investment professional. Use the free, simple search at investor.gov

        We are not brokers, investment or financial advisers, and you should not rely on the information herein as investment advice. We are a marketing company. If you are seeking personal investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Please do your own research before investing, including reading the companies’ SEC filings, press releases, and risk disclosures. Information contained in this profile was provided by the company, extracted from SEC filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it.

        Please read our full disclaimer at CrushTheStreet.com/disclaimer