Investors go all in as they take advantage of ‘rock-bottom’ stocks
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The combination of being confined to our homes, easy access to technology and the hammering of the stock market has led to a dramatic increase in share trading.
On Monday March 23, the S&P/ASX 200 closed at 4,546 points, its lowest level since mid-February 2010. On the same day, the All Ords closed at 4,564.1 points, its lowest level since December 23, 2015.
With little else to do and many people out of work potentially trying to find a way to make some money, share trading has jumped 29 per cent in March compared to October 2019 – before the coronavirus crisis started, according to data compiled from new money managing app Finder.
Over that same period, the average share trading transaction value jumped by 144 per cent to over $500 per transaction, and the number of first-time investors trying their hand at share trading is also on the rise.
According to Finder, one of the most popular searches on the app is “how to invest in shares”.
Finder says over 26,000 Australians have so far downloaded the app since it launched mid-March.
Kylie Purcell, investments editor at Finder, said this was the worst stock market crash since the Black Monday global crash in 1987, with the market witnessing never-before-seen volatility.
“Falls of 7 per cent one day and a 14 per cent rise another day, it’s unbelievable,” she said.
“During a stock market crash, we’d expect to see fewer people interested in investing in shares, but of course many of these investors know that a stock market crash can be a once in a lifetime opportunity to buy good quality companies at discounted prices.
“And volatility, while it can be extremely risky, can also be highly lucrative if you invest in a good quality company at low prices.
“We’re seeing a mix of people becoming interested in the stock market for the first time as well as seasoned investors who have never seen this kind of volatility before.”
But Purcell cautioned that newcomers should “have a strategy and stick to your plan”.
“During times of high volatility people tend to react emotionally and it’s very easy to buy when prices are high and sell when prices are low,” she explained.
“Do your research, stick to your budget and don’t become swept up in the hype.”
Interestingly, data gathered by financial publication LearnBonds also supports this increased hunt for “once in a lifetime opportunity” stocks.
According to LearnBonds, global Google searches for the phrase “buy stocks” have spiked by at least 466 per cent between March 31, 2019 and March 27 this year.
Specifically, there was a significant spike in the wake of rising COVID-19 cases, LearnBonds says.
This interest started in the last week of February, and March this year recorded the highest number of searches.
LearnBonds’ data showed that in the second week of March, the searches shot up by 663 per cent and later 809 per cent. Between March 22 and 27, the searches had increased by 466 per cent.
LearnBonds says the searches could mean that “investors are aiming to take advantage of rock-bottom prices” to potentially profit from in the future.