The stock market reached a record high last week and has grown in 2021 to an estimated 14%.
One of those trends is retail investing. According to a Charles Schwab survey, 15% of the current number of retail investors, began investing in the stock market during Covid-19 in 2020. In other words, while some people lost their jobs, worked form home or found creative ways to face the economic crisis; others decided to learn how to invest in the stock market, get their hustle together, and become what is referred to as a retail investor.
Are You One?
A retail investor invests his or her own money, and not other people’s money in the stock market. An institutional or traditional investor, on the other hand is someone or an organization that invests in the stock market on behalf of others. To keep it simple, basically, you invest in the market on your own versus compensating others to execute market research, open an account, and conduct all the investing on your behalf. When current retail investors were asked why they started investing in the stock market during a pandemic, their response was, we want to build an emergency fund. Given how the market has performed, who can argue with that?
Uneven Playing Field
But, should you be a retail investor, and what are some of the challenges ahead? As a retail investor you conduct the research and due diligence necessary before spending your hard-earned money in the market. Retail investors often have to pay higher fees on their trades, as well as marketing, commission, and other related fees. Further, retail investors are considered unsophisticated and are therefore afforded certain protections and barred from making certain risky, complex investments. However, as a retail investor you may have zero commission trading accounts charges .
When to Sell
Assuming you have joined the growing trend of retail investors, how do you know when to sell your stock? That may depend on why you decided to purchase that stock in the first place. If you purchased the stock because it’s growing or even because it pays dividends, and the stock is no longer fulfilling the goal or purpose, then perhaps you may want to consider selling. Know what you own and why you own it!
Clearly, you may want to sell when the price of the stock keeps falling. I know that seem obvious, but what I mean is that you need to set a hard-stop percentage or number in your mind as a point at which you would sell. For example you could say, “if the stock price falls 15% below what I paid for it, I’m going to sell and move on.”
Money Monday Bonus: WHAT’S UP!
Today’s What’s Up is a reminder about trending “shrink-flation.” I’m not making up this word! You know about inflation, but what is “shrink-flation”? “Shrink-flation” occurs when the company reduces the size or quantity of their products, all while charging you the same price or even more for the product. Decision-makers know that when you go grocery shopping, you tend to be price-conscious and not net-weight conscious. Therefore companies who manufacture cereal such as General Mills, shrink-flated or downsized the contents of its “family size” boxes from 19.3 ounces to 18.1 ounces. So while food prices are going up, the quantity is coming down! Don’t get hood-winked. And that’s what’s up!