April 15, 2024

Rookie stock investors call it quits after portfolio values crashed



Published May 25, 2023, 11:20 p.m. by Naomi Charles


It's official: the stock market is in a correction.

For the last few weeks, investors have been on edge as the stock market has taken a nosedive. The Dow Jones Industrial Average has lost more than 1,000 points, and the S&P 500 is down more than 10 percent from its all-time high.

Many rookie investors who jumped into the market during the bull run of the last few years are now facing big losses. And some of them are throwing in the towel.

"I'm done," said one young investor who spoke to NBC News on the condition of anonymity. "I'm getting out while I still have some money left."

This investor is not alone. A recent survey by E*TRADE found that one in five millennials say they would "definitely or probably" sell all of their stocks if the market keeps falling.

For many young investors, the stock market crash is a rude awakening. They're realizing that investing is not a get-rich-quick scheme. And they're learning that you can lose money in the stock market, even if you're investing in blue-chip companies like Apple and Amazon.

"It's been a tough few weeks for stocks, and rookie investors are feeling the pain," said NerdWallet investing expert Tim Chen. "Many of them are realizing that investing is a long-term game, and they're not prepared to ride out the ups and downs of the market."

If you're a rookie investor who is thinking about quitting, here are three things to consider before you make a final decision:

1. Have a plan

Before you sell all of your stocks, take a step back and evaluate your overall financial situation. Are you investing for the long term or are you trying to make a quick profit?

If you're investing for the long term, then you shouldn't let a short-term market downturn scare you out of the market. Remember, the stock market has always recovered from previous crashes and corrections.

"If you're in it for the long haul, then don't let a little volatility scare you off," said Chen. "The best time to invest is when there's blood in the streets."

2. Consider your losses

If you're selling your stocks because you're worried about further losses, then you need to consider the tax implications of your decision.

If you sell your stocks for a profit, you'll owe capital gains taxes on your gains. But if you sell your stocks at a loss, you can use those losses to offset other capital gains. You can also use up to $3,000 of your losses to offset ordinary income.

"If you're selling your stocks because you're worried about further losses, then you need to consider the tax implications of your decision," said Chen.

3. Stay diversified

One of the biggest mistakes that rookie investors make is putting all of their eggs in one basket. If you have all of your money invested in stocks, then you're taking on too much risk.

Instead, you should diversify your portfolio by investing in a mix of stocks, bonds, and cash. That way, if the stock market crashes, you'll still have some money invested in other asset classes that will hold their value.

"Don't put all of your eggs in one basket," said Chen. "Investing is all about diversification and risk management."

You may also like to read about:



OWN PORTFOLIOS.

A LOT OF THEM GOT INTO

INVESTING DURING THE PANDEMIC.

SOME MADE A LOT OF MONEY, BUT

FOR OTHERS THEY GOT WIPED OUT

IN A BIG WAY.

HERE IS BRIAN CHEUNG WITH

MOORE.

>> Reporter: ALLEN AND HIS WIFE

INVESTED THEIR STOCKS IN THE

PANDEMIC AS IT BEGAN.

NOW THE MONEY IS GONE.

>> I LOST MY WHOLE PORTFOLIO,

WHICH IS VERY UNFORTUNATE.

>> Reporter: WHEN THE STOCK

MARKET DOUBLED IN 2022, HE BET

THAT THE MARKET WOULD GO BACK

UP.

IN 2022, THE S&P 500 LOST

ALMOST 20% IN VALUE, MAKING IT

THE WORST YEAR FOR STOCKS SINCE

THE 2008 FINANCIAL CRISIS.

THAT DECLINE DEVASTATED THE

PORTFOLIOS OF ROOKIE TRADERS

WHO PICKED UP INVESTING DURING

THE PANDEMIC.

>> I KNOW PEOPLE THAT LOST A

LOT OF MONEY.

>> Reporter: AS THE PANDEMIC

STARTED, NEW USERS FLOCKED TO

STARTUPS LIKE ROBIN HOOD.

THEY REPORT MONTHLY ACTIVE

USERS QUADRUPLED BETWEEN

DECEMBER 2019 TO JUNE 2021.

MARVIN STARTED INVESTING USING

ROBIN HOOD AND FOUND REDDIT

FORMS ONLINE WITH STOCKS LIKE

GAME STOP.

>> IT OPEN MY APPETITE TOWARDS

PUTTING MORE MONEY TOWARDS SUCH

SPECULATION.

>> Reporter: THIS HELPED THEM

BREAK $1 MILLION, THE SAME DAY

THAT HIS WIFE SHARED THAT SHE

WAS PREGNANT WITH HER SECOND

CHILD.

AND IT CAME CRASHING DOWN.

>> I HAVE TO FOCUS ON WHAT

MATTERS TO ME.

>> Reporter: BROKERAGES ARE

SHOWING THE AVERAGES HAVE

FALLEN FROM JUNE 2021 TO

NOVEMBER 2022.

THE REPORT SAYS THAT THE USER

BASE SHRANK BY 8.8 MILLION.

MEANWHILE, TD AMERITRADE SAYS

THAT ITS USERS APPEARED TO SELL

STOCKS INTO DECEMBER AS THEY

SIDELINED THEMSELVES FROM A

FALLING MARKET.

>> THEY PROBABLY WON'T HAVE AS

MUCH TO PUT INTO THE MARKET.

YOU WILL SEE THE CONSUMER

SENTIMENT WILL START TO SOUR

AND PEOPLE WILL BE LESS LIKELY

TO INVEST.

>> Reporter: THEY HAVE

SIDELINED THEMSELVES FROM

ACTIVE TRADING, BUT IT ALL

DEPENDS ON THE MARKET.

>> I WILL DEFINITELY GET BACK

INTO IT.

>> Reporter: A HINT OF OPTIMISM

AFTER A BRUTAL YEAR FOR TRADERS.

>> LET'S BRING IN BRIAN CHEUNG.

IT IS SO INTERESTING TO HEAR

ABOUT THIS.

WE WILL SEE HOW THE MARKET

DOES. LET'S GET IN AND STAY IN FOR A

LET'S GET IN AND STAY IN FOR A

VERY LONG TIME, RIGHT?

TIME OUTWEIGHS THE MARKET UPS

AND DOWNS.

THAT IS VERY DIFFERENT FROM

THESE INVESTORS HERE.

WHAT IS THE SENSE OF PEOPLE GETTING BACK INTO THE MARKET IF

GETTING BACK INTO THE MARKET IF

THEY GOT BURNED LAST YEAR?

>> Reporter: SO FAR THE S&P 500

HAS REBOUNDED BY 8.5%.

THAT IS NOT ENOUGH TO RECOVER

EVEN A FRACTION OF THE LOSSES

THAT WE SAW LAST YEAR.

BUT YOU HEARD FROM THE LIKES OF

ALAN SAYING, LOOK.

I COULD BE CONVINCED TO COME

BACK INTO THIS MARKET, EVEN

AFTER THE PSYCHOLOGICAL AND

FINANCIAL DAMAGE THAT THEY

SUSTAINED LAST YEAR.

BUT IN TALKING WITH BOTH MARVIN

Resources:

Similar videos

2CUTURL

Created in 2013, 2CUTURL has been on the forefront of entertainment and breaking news. Our editorial staff delivers high quality articles, video, documentary and live along with multi-platform content.

© 2CUTURL. All Rights Reserved.