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ASIC’s ASX Trading Warning to Retail Investors

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By Ryan Clarkson-Ledward, Thursday, 07 May 2020

According to financial regulator ASIC, investors are out of their depth.

The body has issued a warning after seeing a surge in novice traders trying to go pro.

It seems all this time in isolation has given some people the confidence to try day trading. Not to mention a surge in interest for complex and risky instruments, such as CFDs.

Leaving ASIC with no choice but to speak their mind:

‘Even market professionals find it hard to ‘time’ the market in a turbulent environment, and the risk of significant losses is a regular challenge.

‘For retail investors to attempt the same is particularly dangerous, and likely to lead to heavy losses – losses that could not happen at a worse time for many families.’

It doesn’t get much franker than that.

[conversion type=”in_post”]

More trading, more often

Now, I’m not going to weigh in on whether people should or shouldn’t try go ‘pro’.

That is a decision that is up to the individual and their circumstances.

However, the fact that we’ve seen this surge in interest is fascinating. As ASIC notes, $28 billion was routinely trading hands daily over the five weeks between 24 February and 3 April. Almost doubling the usual average of $15 billion.

In other words, a lot more money was trading hands each and every day.

And coinciding with this heavy trading was an influx of dormant and new accounts. In other words: a lot of new money.

It certainly makes sense logically.

With the market crash in late February/early March, people saw a buying opportunity. Investors rushed into the markets trying to scoop up bargains. As ASIC said, trying to ‘time’ the market by buying at the bottom.

No doubt, many probably have done so. We’ve seen a strong rally from those March lows in recent weeks. But just as many have probably lost money as well.

However, it is the timing of this warning that is peculiar. After all, the damage is likely already done.

That is, unless ASIC is worried about more pain to come. And it is certainly a possibility that I believe they are concerned about…

See, despite the market movement lately, we may not be out of the woods just yet. This corona-induced crash may still have some legs left to it.

In fact, my colleague Shae Russell believes now is not the time to jump into the stock market. Instead, she’s preparing for the potential of an even bigger crash to come. To learn more about this, and how you should plan to avoid it, read more here.

Whether or not Shae is right, well only time will tell.

But, it’s pretty clear that ASIC has their concerns.

Regards,

Ryan Clarkson-Ledward,
For Daily Reckoning Australia

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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