“First-time investors need to get a better understanding of complex financial instruments, such as options, before trading them,”
“Searches related to first-time investing have risen since 2019 with a sharp spike during the peak of the coronavirus crisis,” said Evgeny Fetisov, CFO at SEMrush. “The rise in search volume can be attributed to the country’s economic downturn as new investors saw more opportunity within the market at a potentially cheaper access point. We anticipate this trend to continue as the market rebounds, and first-time investors begin to see a positive return.”
In a separate analysis of traffic on our own website, we found that the number of U.S.-based users on IGF Financial jumped from 13.1 million in January and February 2020 to 21.5 million in March and April, an increase of more than 64 percent. Interestingly enough, only a small increase of 12% was seen in May and June (24 million users), signaling that not only was this substantial increase in new investors confined to the stock market crash back in March, but that these new investors are also sticking around for the time being. This was a trend not only confined to the U.S. either, with a 60% increase in users seen over March and April.
“Essentially bored sports bettors shifted their focus to day-trading when the coronavirus pandemic brought sporting events to a halt earlier this year,”. “Barstool Sports founder Dave Portnoy has become the poster child of this day-trading craze that has taken Wall Street by storm. The big question is how many of these first-time day-traders will stay in the market once sports are back on.”
Which stocks are attracting the greatest surges in interest during these times? From December 2019 to May 2020, the group of companies which saw the largest percentage increases include multiple airlines, cruise lines, and oil companies. In these instances, investors are likely perceiving buying opportunities for plummeting stocks in hard-hit industries. Simultaneously, rising interest in the Zoom videoconference platform and pharmaceutical companies reflects how investors are betting on the companies that are providing solutions to the pandemic’s challenges.
“While market participants are still struggling to understand the true extent of the damage from the fast-spreading virus outbreak, many first-time traders chose to ignore the risk and buy the dip in some of the hardest-hit names in the market,”. “In retrospect, that wasn’t such a bad move.”
“First-time investors need to get a better understanding of complex financial instruments, such as options, before trading them,”. “In addition, more of an effort needs to be made by trading platforms to provide educational material to novice traders. One potential solution can be to introduce eligibility requirements for individuals who wish to use exotic financial instruments typically used by sophisticated investors.”