The stock market has been the subject of much media scrutiny in recent weeks “for not a good reason” said Associate Professor of finance, Robert Atra.
With ‘pump-and-dump’ stocks like Gamestop and AMC dominating headlines via Reddit pages including the nine million member subreddit WallStreetBets, experienced investors like Atra look to calm the storm with sound investing advice.
“What people need to invest for is the long-term stocks,” Atra said. “Those kind of things like Gamestop probably have virtually zero impact on 401Ks in the long term and other types of goals you’re trying to achieve.”
Despite their recent popularity, Atra says that pump-and-dumps are a relatively common occurrence in the stock market.
“This one was a little more high-profile, but every now and then some big news will happen about a company that a lot of times has to do with day-traders like on WallStreetBets,” Atra said. “Day-traders come and they figure out they can’t make any money and then they go, it’s happened in the past.”
Senior Ryan Goff, who serves as the vice president of the Hillsdale College Investment Club thinks that people should look into options that are safer for their money that day-trading.
“If you’re going to participate in that, you have to be comfortable losing 100% of that money,” Goff said. “I have no issue with people who are doing that, but if you want all of the typical reasons that people invest, to be able to spend more of it later, don’t do that.”
Buying stocks of any kind comes with a certain amount of risk, and Goff believes that with little or no knowledge about the market or the actual logistics of the company in which you’re investing, the amount of unnecessary risk outweighs the potential benefits. Instead, Goff says that well-researched smart investments for the long-term are the way to go.
“If you believe that the market only goes up, like a lot of people talk about these days, just do an ETF of a broader index, like the S&P or the NASDAQ or the Dow Jones Industrial Average, those broader indexes are generally appreciating in value,” Goff said.
The President of the Hillsdale College Investment Club, senior Reed Lawe, agreed that long term investments are the most beneficial.
“The number one thing is that Albert Einstein said that compound interest is the eighth wonder of the world. That’s super true, and that’s a reason why young people should invest early,” Lawe said. “When you put money in the market very early, then it has a longer period of time to grow, even your earnings are going to begin paying dividends, and you’re really going to pick up steam, very quickly, especially as you get later in life.”
Not only is investing early in life a great way to grow your money, but Lawe says that the stock market isn’t always the best place to go with excess funds.
“If you really want to go about, making money, you should not just consider investing in the stock market, but also consider, you know, paying down your credit card bill if you have, a balance running, or even being aggressive, your student loans sometimes that’s more important than just funneling money into your brokerage account,” Lawe said.
If you are going to use your money for investments into the stock market, Atra has the perfect place for you to put it.
“What I would recommend is find a good mutual fund. Go to a company like Vanguard or a similar type of fund, not only do they allow you to invest in a diversified portfolio, but they have excellent education screens on their websites,” Atra said. “They even have people that will, for free, guide you as to what you need to do.”
Atra especially suggests this for the new or inexperienced investor, not only for the education that the mutual funds offer, but for the ease of starting your investing process.
“If you just go to the mutual funds themselves, they frequently have everything you need to get started, you can get started with a very small amount of money; $100, $500, whatever,” Atra said. “You can then set that up as an investing program, where you invest a certain amount of money per month.”
With plenty of distractions for new investors, Lawe says that staying focussed on the long-term trades is the key to financial success.
“Something that I think young people fail to understand is not trying to be a day trader. The number one most important virtue when it comes to investing, is just patience,” Lawe said. “So buying companies that have intrinsic value and holding them for a very very long time, that’s really the greatest way to see returns, not by trying to time the market.”