- The GameStop saga has further ignited Australian activity in the market as a serious number of new investors sign up for a range of broker platforms.
- In January, Stockspot said it saw a 50% increase in new signups alone while eToro claimed one million to date this year.
- “Just over the last couple of months, I’m starting to see that that level of excitement that we saw back in ’99, which I haven’t seen since,” Stockspot founder Chris Brycki told Business Insider Australia.
- Visit Business Insider Australia’s homepage for more stories.
The biggest story in finance right now has captured the imagination of Australians, as local investment platforms ride a second investor boom.
Last week the concerted campaign to force up the stock price of bricks-and-mortar video game retailer GameStop, and squeeze the hedge funds which had shorted it, took on a life of its own.
Pegged as a David-Goliath battle between small everyday investors and Wall Street behemoths, there were fortunes to make or lose depending when you jumped in and when you jumped out.
While the jury is out on whether Australians could pull off a similar squeeze on the local market, the story has reignited Australian interest in investing.
Chris Brycki, founder of investment advisor Stockspot and trader of three decades, has seen the impact firsthand.
“Investing has become a topic of conversation again, and it shows. Robinhood became the most downloaded app in the US last week, which has never happened to an investment app before,”Brycki told Business Insider Australia.
Closer to home, it feels much the same.
“Just over the last couple of months, I’m starting to see that that level of excitement that we saw back in ’99, which I haven’t seen since. Retail investors really want to get involved right now.”
Parallels to that era, characterised by the dot-com bubble, market exuberance, wild valuations and eventual heartbreak for many, may not necessarily be a good thing.
But while the public imagination right now might be captured by the meteoric rise of cryprocurrencies and the GameStop saga, Australians appear to be interested in more than mere speculation.
Stockspot, which promotes holding a diversified portfolio for the long-term, in some ways represents the antithesis to the Robinhood trader. And yet, it’s hardly being left out in the cold.
“We saw really steady growth last year but the last few months has really seen that step up. December had been our biggest month ever for new users and then January jumped 50% on that record,” Brycki said, noting the business hadn’t seen anything like it over its seven-year history.
“There’s obviously people excited to participate in that speculative mania, but there’s also a lot of people who aren’t looking to gamble and just want to earn a decent return.”
Booming business for brokers
The Stockspot experience isn’t unique.
The latest data shows ASX trading hit $5.8 billion in January alone, up more than 20% on last January. Curiously, the number and volume of trades declined on last year’s figures, suggesting far bigger average buying and selling.
Both local and international brokers meanwhile have managed to clip the ticket on the way through, as they see an enormous influx of users.
Global investment platform eToro added 5 million users in 2020 alone. But much like Stockspot, it has been the last four weeks when things really took off.
“In January we surpassed 1 million new registered users globally year to date,” a spokesperson told Business Insider Australia. “We are seeing a generational social movement of retail investors who want to equally participate in the stock markets.”
While the new business is obviously welcome, there’s clearly a level of anxiety around where an overvalued market and rampant speculation could lead.
“Is it without dangers or risks? No. Some stocks are incredibly high risk at the moment and we’re urging our users to be cautious and to not simply invest in a stock just because it is going up,” the eToro spokesperson said.
Investors restricted from GameStop
It’s notable for example that eToro, Robinhood and others have had to move quickly to restrict trading on GameStop (GME), in some cases on top of other stocks and trading instruments.
“We would like to remind our users that we are seeing unprecedented market conditions and we may need to introduce restrictions to certain stocks at very short or no notice based on our liquidity providers,” eToro said.
Local commission-free broker Stake followed suit.
“We have just received notification, our broker-dealer in the US, DriveWealth, will not be able to offer Buys on GameStop ($GME), AMC Entertainment ($AMC) and Nokia ($NOK) due to increased capital requirements set by the DTC,” an email sent from Stake to users on Tuesday read, although emphasising the decision was DriveWealth and not Stake’s.
Such decisions have caused quite a stir among users, upset they are being shut out of the GME trade.
Data provided to Business Insider Australia by comparison site BrokerChooser shows searches for brokers more than quadrupled in the last week of January, attributing some of the activity to “trading restrictions and platform outages at Robinhood” and others.
Where does it end?
But while it’s understandable that Australians are keen to get in on the action, it’s important they know what they’re doing, according to Brycki.
“I think some don’t actually appreciate that there’s a huge difference between day trading penny stocks or buying ETFs. The risks and rewards are completely different, and whatever you put into the former you’ve got to be prepared to lose,” Brycki said.
“If you get involved in speculative trading, just understand you’re buying a lottery ticket. There’s gonna be very few winners and most people are going to lose so treat it as such.”
Disclaimer: This article contains general information only and is not intended to be used as personal advice.
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