The last year has seen increased interest in investments, and currently 15% of retail investors are new to the stock market. While some post-2020 investors are older and dabbling in the market for the first time, the median age of this new group is only 35: 13 years younger than in previous years.
They are also more optimistic about the market and confident in the performance of major averages. Having been enticed by highly publicized meme stocks offering short-term profits, almost two thirds of new investors are now looking for professional guidance in order to make more informed long-term choices and build wealth on the stock market.
Learning About Investment Strategies
While first-time investors are responsible for a recent rise of 25% in retail trading, not all of them have an informed investment strategy to ensure success. New investors tend to repeat the same common mistakes, such as only following short-term meme trends or failing to diversify their blue chip stocks.
While all investments carry at least some degree of risk, the right guidance can give first-time investors a valuable understanding of the stock market. This will allow them to take more control over their own money, and learn a range of strategies to maximize returns.
Taking A Risk With Meme Stocks
Over the past year, many new investors have been attracted to the market by meme stock. Meme stocks are created when individual investors use social media to drive up interest in the shares of publicly traded companies. The video game retailer Gamestop made the headlines in January, when the stock market was manipulated to see its share rise by 1500%.
And the latest example is AMC, whose stock is currently soaring. While they have encouraged many younger people to start investing, meme stocks are incredibly risky, and probably not the most suitable for first-time investors. Due to the current volatility, AMC themselves have advised investors against buying their stock unless they are prepared for heavy losses.
Relying On Long-Term Steady Growth
For first-time investors, choosing steadier and well-established blue-chip stocks can be a safer strategy than blindly following the latest trends. Many of the Fortune 500 companies are blue-chip stocks that have prospered for years. Although these stocks may be more expensive to buy in the first place, over the long-term, they can provide a steady income through regular dividends. Looking at a company’s trend in dividends over the course of a few years will also give a good indication of how well it is doing, and whether it is worth investing in for long-term wealth building opportunities.
With the right guidance, first-time investors can avoid common novice mistakes and take advantage of wealth-building opportunities on the stock market. Whether they’re attracted by the latest meme stock or looking for more reliable blue-chip investments, learning strategies to reduce risk and maximize profits will help them stay in control of their money.