Robinhood Investors in the Market

Robinhood investors in the market, someone may think, who are all these so called Robinhood investors. During this Covid 19 period, the Sensex hit 39,000 points in September from    25,000 in March.   There may be several reasons behind this boom in the market, but there is a one new reason this time, that is Robin hood investors

 

Where from this name originates?

Robin Hood, a company in the USA, launched an easy to use mobile app called Robin Hood trading app, which has lured a lot of new investors into market.  Similarly, according to various statistics, the number of new investors entering the world of trade during this Covid 19 period across the globe is really high. Hence all these new breeds of investors around the world are identified as Robinhood investors. It is a loose term and it seems no standard definition for this usage

 

Who are they?

In the present context, the following categories can be classified as Robinhood investors.

 

·       These are People without prior experience in markets

·       Mostly bubbling youngsters with investible surplus money

·       Who are versatile users of online platforms to buy and sell?

·       Millennial  who are all  born around 2000

·       During this Covid 19 period, most of these people are working from home. Have some time and money to play in the markets

 

When we look at the above, we can’t avoid the IT peoples image comes to our mind

 

Unfolding scenario

 

How we can confidently say Robin hood investors are one of the reasons for rising markets? Some statistics points fingers to exponential raise of new Dmat account. In first four months of lockdown counts of Dmat accounts opened in India is very high. It is whopping 300 percent growth. Another observation is shares trading below Rs 5, non-income shares, etc.   have climbed to an unimaginable levels.. Generally, new investors buy such penny stocks.

Another school of thought is, since mutual funds are not giving return with in the 1-3 years’ time frame, those investors are exiting Mutual Funds and investing in the stock market by themselves. They are trying direct market play with the intention of making more money here than via mutual funds

 

Points to ponder

Market is the open place for anyone to buy and sell. It is good for the market when many people participate in the market.  Those who new in the market, it is better for them to understand the fluctuations, volatility of the market.  Apart from that, it is dangerous to play the market like a video game. When the loss comes in the market, it is real money loss, not like video game or monopoly game.

 

1.     Market is zero sum game.   One's loss, is the profit of the other. Our profit is loss for another. The cycle continues

 

2.     In India, about 5000 to 6000 companies have been listed in the market. Whereas daily traded stocks in the market is very few among this 6000 companies.  Out of these 6000 shares, Large cap shares are only 100.   Midcap shares are next   250. Others are small or Micro-cap shares. Understand this well. When you buy shares, understand, the share belongs to which category. The reason is return potential and liquidity of shares based on capitalization.  There are advantages and disadvantages in each category. So, you should choose the suitable stocks. General rule is avoiding small and micro caps, unless otherwise you are confident the company will do well  

 

3.     It is better to look at the good company stocks, seeing fundamentals or technical, rather than deciding based on, below Rs 5 or 50 as criteria for choosing our stocks. All low-priced shares are not good companies for investments. Reality is mostly in the other way, i.e.  they are at low because they are not doing well

 

4.     It is easy to buy shares when the market is in bull phase, and if we try to sell the same shares when the market in bearish mood, we may not be able to exit/ sell even with losses.  The is the nature of the market and investors should understand these characteristics of markets. For example, thinly traded shares are  not traded in market very frequently   It is better to avoid this type thinly traded shares

 

5.     Tips from neighbors, brokers, business channels on TV, WhatsApp, etc. are mostly not helpful, buying shares based on these unverified tips are not very profitable.

 

6.     Avoid buying  companies that have no income of even a rupee in the last several  years

 

7.     Do not buy stocks in a hurry.  Investigate the reason for sudden fall, if it is worth in spite of the fall, then buy, else clear away from those stocks  Do not catch the falling knife

 

The market is a substance that increases our adrenaline. It is a pleasure to buy Reliance for Rs 800 in March and sell it for Rs 2000+ in September.  There is very little possibility of such a profit elsewhere.  In the same period, if we take L&T, another large cap company, the share price t has not come to its previous corvid price.  Note that there are people who bought YES Bank at Rs 367 and sold it at Rs 14 in the same market.

 

The market does not climb or descend according to individual preferences. That is market, Read well.  understand nitty grities and then enter the market. All the best