My sympathy and concern lie with the young and inexperienced investors. They may lose their motivation to invest for lack of trust in the financial markets.
How Will This Market Frenzy End?
There will be books to explain it with hindsight and at least one movie to entertain and educate us. “Wolf of Wall Street” will pale next to this new story.
1. Get Your Finances In Order First
Never invest money in the market you can’t afford to lose. Before investing, make sure you can keep your lights on by paying the utility bills.
3. Don’t Use Leverage Through Margin Buying
Buying or trading stocks on margin is a significant risky move. When buying shares in a company, you may use some of your own money.
4. Short-Selling Is Complicated
For experienced traders and investors, short-selling has its merits, but there is no place for inexperienced traders or investors.
7. Diversification Minimizes Risk
Concentration in one stock is risky. What if you yoloed, and put a significant amount of your money in GameStop, and it suddenly dropped precipitously.
The unusual market activity prompted by social media-driven calls to buy stocks to counter heavily shorted stocks borrowed by institutional investors is dangerous.