Online retail investors weather the market storm

Global stock markets started the year with a sharp decline, leaving some investors wondering if they are witnessing the start of a stock market crash.

Wall Street had its worst week since March 2020 as tech stocks continued to take the brunt of the selloff, with the Nasdaq dropping 2.7%.

The New Zealand NZX 50 index is down 7.6% since the start of the year.

This is the very environment that many market commentators believe is causing online retail investors, who invest through online platforms like Sharesies and Hatch, to panic and sell out.

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While the Australian Financial Review reported this week that the market decline has become a “rout in its own right” due to retail investors doing exactly that, according to platforms in New Zealand, which has not been the case.

Gus Watson, head of new investments at Sharesies, said market commentators blaming the selloff on retail investors have the wrong end of the stick.

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Gus Watson, head of new investments at Sharesies, said market commentators blaming the selloff on retail investors have the wrong end of the stick.

Gus Watson, head of new investments at Sharesies, said market commentators blaming the selloff on retail investors have the wrong end of the stick.

“There hasn’t actually been a massive shift in buying and selling movements on our platform. There’s still a lot of volatility driving trading, but it’s not one way or the other. other as suggested by some commentators who have no visibility on what is really going on,” he says.

Trading has remained stable on the platform, more so than the last time there was a market decline of this size in March 2020, Watson says.

“Overall this week we’ve seen more buying than selling in terms of value. Every day we’ve seen more buyers than sellers on the platform. Which I think shows most of our users stick to their plans,” says Watson.

Kristen Lunman, chief executive of Hatch, said a similar story was playing out on the platform in which buy-to-sell ratios didn’t change by more than one percentage point from month to month. ‘other.

Lunman says the most exciting thing about this market downturn is seeing the social aspect of online platforms, something that has been criticized by market commentators, come together during this time.

Kristen Lunman, chief executive of Hatch, said the most exciting thing about this market downturn was seeing the social aspect of online platforms come together during this time.

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Kristen Lunman, chief executive of Hatch, said the most exciting thing about this market downturn was seeing the social aspect of online platforms come together during this time.

“It’s been a while. No one was thrilled to wake up in the morning and look at their wallet balance. But everyone is in the same situation, and in the Hatch Investor Group, we’ve really seen the power of community,” she says.

Lunman says Hatch investors use the Facebook community to share advice, encourage investors to hold and supplement their portfolios.

In terms of behavioral trends, the two things Hatch investors do are own or buy blue chip companies and defensive stocks.

There was no increase in sales during the volatile period, Lunman said.

Matt Leibowitz, managing director of Stake, said his investing platform saw no change in the ratio of buyers to sellers, showing that investors continued to invest during market volatility.

“The power is no longer in the hands of institutional investors to make money when the market is down. Individual investors can use a platform like Stake to get involved in the market and make money , no matter what,” he says.

Matt Leibowitz, managing director of Stake, said that while platforms have enabled access to investments, the basic principles of investing remain the same.

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Matt Leibowitz, managing director of Stake, said that while platforms have enabled access to investments, the basic principles of investing remain the same.

Leibowitz says that while the platforms have opened up access to small investors, the principles of investing have remained the same.

“Retail investors should be able to be as dynamic and agile as large institutional investors. In tough market conditions like today, that’s when rubber hits the road,” he says.

Paul Gregory, director of investment management at the Autorité des marchés financiers, said market volatility is a time when the discipline of retail investors will be tested.

Paul Gregory, director of investment management at the FMA, says that while it is encouraging to see a lack of panic on retail investment platforms, it was too early to tell if the trend was spreading to KiwiSaver and to other financial products.

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Paul Gregory, director of investment management at the FMA, says that while it is encouraging to see a lack of panic on retail investment platforms, it was too early to tell if the trend was spreading to KiwiSaver and to other financial products.

“The fact that we’re not seeing any fund shifts or panic selling at this point is a good thing. This could indicate that these investors have a strategy and are sticking to it, or that they use volatility to buy things they like for less.

“Those are two pretty decent disciplines of investing, and when a discipline gets tested the most is when it’s hard to do, like right now,” Gregory says.

But it’s too early to tell whether the trends on investment platforms are widespread, as switching data for KiwiSaver funds and other funds won’t be known for a few months, he says.

Market volatility is an opportunity for investors to do three things, he says.

“Check with yourself how well you handle volatility psychologically. Check if you are in the right fund or the right strategy for your age and your goals. And volatility provides an opportunity to get cheap companies or stocks, but it takes a lot of discipline because they can go down further before going up,” says Gregory.

Jeremy Sullivan, investment adviser at stock brokerage Hamilton Hindin Green, says his clients have also taken the market downturn as an opportunity to reinvest.

But while retail investor behavior may appear to be the same as that of a large brokerage firm, there are key differences in the details of what happens, Sullivan says.

Hamilton Hindin Greene investment adviser Jeremy Sullivan says the main difference between a retail investor and a professional stock broker is having a detailed long-term plan.

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Hamilton Hindin Greene investment adviser Jeremy Sullivan says the main difference between a retail investor and a professional stock broker is having a detailed long-term plan.

“One of the most common differences between what a retail investor does and what we do is that we have a very detailed plan that we can refer to.

“While retail investors may not be panicking, I would argue that they are not looking for a specific asset allocation based on their risk profile. Or regularly checking their tolerances,” Sullivan explains.

A broker or adviser is better able to help their client navigate a turbulent market by ensuring their portfolios are diversified enough to take advantage of lower prices in certain sections of the market, he says.

Anne G. Cash