eBusiness Weekly
Lena Birse is a stay-at-home mom who loves buying tech stocks during market crashes. Jay Smith is a former pro gamer who switched from cryptocurrencies to blue chips.
Heloise Greeff is a data scientist who uses machine learning to analyse trading patterns. And Mik Mullins is a retired hotel executive who’s betting the market is about to plunge.
These four amateur traders use different approaches but have one thing in common: They’re killing it in one of the wildest markets in memory, with returns ranging from 20 percent to 60 percent this year.
While many institutional investors bailed out of the market in the early stages of the Covid-19 pandemic, retail investors have piled in and pocketed big gains, especially in surging tech stocks.
The US digital brokerage Robinhood signed up 3 million new users in the first five months of the year, giving it 13 million total customers, which is almost as much as at Charles Schwab Corp. Stockpicking, which has long been eclipsed by investing in index-tracking funds, is suddenly back in vogue.
Playing the market is fraught with risks, of course, and stories abound of newcomers making rookie mistakes, never mind professional investors who’ve fallen short during the relentless rally in American stocks. To learn how to avoid pitfalls, Bloomberg News picked the brains of these four top performers on eToro, a digital trading platform with 14 million users that’s regulated by the UK’s Financial Conduct Authority. eToro lets people copy the trades of investors with proven track records, like this quartet.
They all believe newcomers make mistakes by not investing for the long term and for failing to diversify their portfolios with at least 30 well-researched names. Here are the other things they see people doing wrong, based on their experience:
Jumping in without testing
out trading strategies
When Heloise Greeff decided to plunge into the stock market in 2016, she did what any good scientist does — she experimented. Greeff, a 30-year-old research fellow in machine learning at Oxford University, used a “demo account” on eToro to execute simulated trades with $100 000 of fake money. She discovered straight away that trying to time the market and trade in and out of positions everyday was a bad idea.
“I was impatient, and I didn’t want to wait for things, so I started off looking at commodities, and I was drawn to oil, which was quite volatile,” says Greeff via Zoom from her flat near Oxford’s historic cluster of colleges.
“Using the account, I could do that without losing any real money, and I learned some hard lessons before I put real skin in the game.”
Greeff loves looking for patterns in oceans of market data.
When the S&P 500 Index and other benchmarks were hitting all-time highs late last year, the data was sending her a powerful signal: It was time to retreat.
“I am a conservative trader so I liquidated 60 percent of the positions in my portfolio, and while I missed the highs of January, I had peace of mind,” she says. — Bloomberg.
