Beware ‘chasing rainbows’ in stocks: Gillham
Investors backing herd trends like GameStop and silver stocks are “chasing rainbows” and risk losing thousands of dollars, according to Wealth Within’s Dale Gillham.
Retail investors bought up silver stocks last week, encouraged by social media posts on Reddit, in the hope they would be next GameStop which caused silver to rise in demand but then fell to trade lower.
Shares in small-cap silver stock, Golden Deeps, for example, traded $1.2 million shares in one day compared to its usual trading range of $10,000-$20,000.
Similarly, ETFS Physical Silver ETF saw inflows of $76 million in one day compared to unit creations of $4.3m in the previous week.
Gillham, chief analyst at Wealth Within, said: “While I appreciate the desire to make money, there are always those who like to chase rainbows hoping to find that elusive pot of gold, which is why lotteries are so popular. However, unlike the lottery where you only pay a few dollars for a ticket, those who chase rainbows in the stock market typically lose thousands of dollars and sometimes much more.
“Reading chat forums or watching YouTube videos hoping to find the next big winner is a pursuit that generally results in the opposite occurring and rather being a master of the market, many become a statistic.”
Shane Oliver, chief economist at AMP Capital, said: “The Reddit crowd will work out just like everyone else has over the decades that there is no free lunch when it comes to investing and excitement does not necessarily equal investing success. As always it may take a bit of pain to learn that lesson.”
AUTHOR
Laura Dew
Recommended for you
Ten Cap has announced it will launch its first active ETF on the ASX later this month, expanding retail access to its flagship Australian equities strategy.
Flows into cash and fixed income ETFs rose by 46 per cent in October with investors particularly demonstrating a preference for Australian credit ETFs as they move away from AT1 bank hybrids.
Having identified Australia as a growth market, J.P. Morgan Asset Management has collaborated with Betashares to offer two multi-asset managed portfolios on its Direct platform, the first funds on the platform from an external manager.
First Sentier has announced it will transition the Stewart Investors investment management responsibilities to its affiliate investment team in light of three senior portfolio manager exits.
