Bear Market Coming In 2021?

The retail investor group needs to be distinguished. There are always retail investors in the market. Many of them who have been investing for years have done well. The makeup of retail investors changes during manias as those looking to make fast money far outnumbers those in it for the long haul. Branding all retail investors as ‘dumb money’, as many tend to do, is harsh. We aren’t saying the outperformance this year makes retail great. That won’t continue because they are going with risky strategies and investing in hot companies they don’t understand.

Broadly speaking, new speculators don’t have a firm grasp on genomics unless they come from the medical field. In Robinhood’s year in review, they mentioned over 3.2 million people read their educational articles as daily visits were up 260%. Over 2 million people invested with fractional shares.

Engaging with new content to learn about investing is great. Broadening the number of people who invest in stocks is also great. However, we all know the motivation behind this movement is quick profits, and the fact that people were forced to stay home. If many story stocks didn’t have triple-digit gains, retail wouldn’t be interested. Retail is also causing these large gains by piling into the hottest names. By definition, the popular stocks have the most investor capital. That isn’t a sustainable investing strategy. Beating the market by triple doesn’t matter if you lose money the next year. It’s simply impossible for the vast majority of new investors to do well if they have the wrong mindset.

ARK Innovation Fund Goes Parabolic

The point in discussing ARK Invest is to gage the euphoria in retail buying rather than to say they are good or bad investors. When everyone piles into any security, it becomes a measurement of sentiment. That’s why bitcoin is also a measurement of sentiment as it hits record highs in late 2020. Speculators are feeling greedy. They are willing to place big bets on margin on pretty much anything that has gone up a lot.

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