Making money is all about taking risks, and no one can testify to that more than investors. They spend their lives taking risks on stocks in the hopes the returns will make it all worth it (and if you’re an investor already, you know this). The arrival of COVID-19 transformed business across all sectors, but this was especially true for the stock market.
Initially, there were numerous losses recorded, as countless businesses saw their net worth plummet. This meant that an increasing number of investors were reluctant to put their money behind any stocks. The experts of Wall Street all anticipated the same prolonged market crash, so they saved their investments for another day.
However, not everyone felt the same way. A variety of young investors made investments that actually saw substantial returns. This was despite the odds stacked against them. How did they do it? A mixture of dedication and sheer youthful recklessness.
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How Did COVID-19 Affect the Stock Market?
For over a decade, the investment markets had been on a continuous rise. Not since the banking crisis in 2008 has the world suffered a global economic crisis like the one delivered by COVID-19. The pandemic resulted in many experienced investors turning their backs on investments they’d usually make. For younger investors, this introduced them to entirely new territory.
One of the industries hit hardest by the coronavirus were airlines. With near-global travel bans, millions of tourists and globetrotting business people alike found themselves grounded. This meant airlines saw their profits nosedive, along with the value of their stocks.
Naturally, this discouraged the majority of investors from going anywhere near them. A global pandemic is not the time to invest in airline stocks. Unless, apparently, you’re willing to take some necessary risks. One young investor, Lequon Godbolt, used the Robinhood trading app to earn over $1,500 in just 24 hours.
More experienced Wall Street investors had all but stopped their investing, and certainly weren’t going to put their money into a folding airline. Conversely, Godbolt took the risk and yielded remarkable rewards. This wasn’t an isolated event, either. Numerous younger generation investors have found success in times of uncertainty.
Another investor successfully managed to flip his sister’s stimulus check almost tenfold purely through well-placed investments. The common thread is the willingness to take risks that the more traditional investors didn’t.
Why Are Younger Investors Finding Success?
There are a variety of theories. One is that COVID-19 poses the first global economic crisis many younger investors have experienced. The last time the world was thrown into such economic uncertainty was over a decade ago when many young investors were still in school.
This is new territory for many of them, which may explain why they feel so free to invest money in seemingly risky stocks. The older generations have been burned before, so they know to hold back. This isn’t the first time the younger generations have found success in tumultuous economic periods.
Truthfully, younger people aren’t finding success in investing through pure luck alone. From an outside perspective, the world of investing may resemble a form of gambling. However, it takes creativity and experience to know which stocks are worth taking the risk on.
During this period of coronavirus volatility, the stakes are even higher, but it isn’t the younger generation’s brash nature alone that’s rewarding them. There are plenty of reckless members of the older generation. There are numerous factors at play helping the younger generation earn large amounts in such precarious times.
Why Do Young Investors Have the Advantage?
Let’s explore the term ‘risk’ when discussing the investment market. It isn’t like COVID-19 introduced the concept of taking risks to investors. In the same way, this isn’t the first time younger investors have taken risks. Without risk, there is no investment market. The entire stock market economy is centered on playing your cards at the right time.
In general, younger investors are far more likely to invest in ‘riskier’ stocks because they have less to lose. If you are in your 20s with decades of money-making ahead of you, you’re far more likely to put your money into a risky stock than someone approaching retirement age.
The new coronavirus volatility aspect has simply made this more apparent. The risks are greater now, but it’s still the younger generations reaping the rewards. However, this isn’t solely down to the ability to make moves their older counterparts are reluctant to. Technology is a powerful tool, and the younger generation dominates that field.
Whether it’s using specialized apps to keep a closer eye on market fluctuations, or simply browsing the internet for the latest economic news, the younger generation is certainly more in tune. This is before we consider the benefits of social media and live chat rooms that actively work to keep users up-to-date on stock movements.
Are older generations ignorant of the tools available to them? No, but it’s natural that the generation raised surrounded by technology experiences an affinity for it. This tech-savvy culture may be giving the investor that sits alone in his or her bedroom the advantage over some of the Wall Street behemoths.
However, this period of unanticipated success doesn’t mean everyone under the age of 30 should start investing. You shouldn’t start throwing your savings into questionable stock investments because it worked for a few people. Likewise, if you’ve been investing for the past few years you shouldn’t choose now to bail out. Investing is a long-term game.
If you’re new to the world of investing then you’re probably questioning your life choices right now. Granted, moving into investing during a global economic crisis doesn’t appear to be a wise move. Having said that, success through investing is all about holding your nerve.
If Godbolt and other young investors had pulled out of the market as soon as the market plummeted, they never would have enjoyed their rewards. It’s natural for the market to fluctuate. These are certainly unprecedented times, but that doesn’t mean that the investment market is a trap.
In fact, now is arguably the perfect time to be investing in stocks. As this is the first economic crisis in over a decade many investors are taking themselves out of the game. This means less competition for potentially lucrative stock opportunities. Holding your nerve can prove highly rewarding.
No one making investments wants to see the value of their stocks plummet, but knee-jerk reactions won’t help you. If you start attempting to sell off your stocks now in a last bid to earn any money you can, you will just be joining the rat race. Instead, you may consider holding on.
The economic fluctuations seen over the past five years via Brexit provides us with a stellar example of how the market has a habit of bouncing back, though in a different country. While the environment brought on by coronavirus volatility is on a much larger scale, the same economic rules apply.
To reiterate a previous point: investing is all about risk.
The fragility of the market isn’t unique to COVID-19. If you sell all of your stocks the moment they are in free-fall, you really weren’t committed to taking the risks necessary to succeed in investing. Hold on, and you might yield some pretty significant returns.
What Does the Future of the Stock Market Look Like?
While nobody can accurately predict the future, certainly not during a global pandemic, it does seem increasingly likely that the economy is going to experience a V-shaped recovery. As its name may suggest, this is defined by the economy suffering a steep drop followed by a dramatic recovery.
Reason to believe this stems from the U.S. economy performing far better than originally projected. The mandated lock-down led many to believe that there would be detrimental ramifications for years to come. Instead, stocks have already seen a significant boost throughout June, and unemployment dipped to 11.1% as opposed to the estimated 19.5%.
The investment market itself saw a recent boom, specifically from younger users. The stock trading site Robinhood saw an unprecedented surge in sign-ups totaling at over three million new accounts. These new accounts began buying stocks in some of the hardest-hit sectors, including airlines, casinos, and hotels.
Best Online Discount Brokers
- You Invest by J.P. Morgan: Best for free trades and cash bonuses.
- Ally Invest: Best for new investors and those looking for a very easy website to navigate.
- TD Ameritrade: Ideal for more experienced traders looking for a rich set of tools and resources.
- Public: Offers a social investing experience where you can exchange ideas with friends and experts.
The stock market is unpredictable at the best of times, but this has always been the way. The heightened uncertainty brought about by COVID-19 is allowing young investors like Godbolt to find success. If you’re currently feeling overwhelmed by this uncertainty, reassess your relationship with risk.
Success in investment comes from two places: willingness to take risks, and the diligence to stick to a long-term plan.