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https://markets.businessinsider.com/news/stocks/stock-market-volatility-how-retail-investors-fared-this-year-2018-12-1027829466
Volatility ravaged the stock market this year. Here's what that was like for first-time investors. (NFLX, SFIX, EL, IRBT)
Rebecca Ungarino
Dec. 21, 2018, 11:00 AM
Drew Angerer/Getty Images- Stocks were particularly volatile in 2018 after years of slow and steady gains for the major US markets. That might be intimidating to novice investors.
- Business Insider spoke with new retail investors, all millennials, to find out what they learned amid the volatility.
- "Starting now is difficult because of the volatility in the market, and so I think what's important is for individuals to accept what camp are they in," one financial adviser said. "Are they trying to be active traders in the market, or are they trying to be long-term investors?"
The stock market was relentless in 2018. The tone was often uncertain, with the market many times opening higher only to turn red in the afternoon. Trade wars, rising interest rates, and concerns around slowing economic growth dominated the fundamental backdrop.
Investors who entered the market for the first time at the start of this turbulent year surely didn't know they'd be in for such an uneven ride. The S&P 500 posted 60 intraday moves of 1% in either direction, the most since 2015, according to LPL Research. But they're holding on as the major US indexes have plummeted into a correction — down at least 10% from their recent peaks.
Business Insider spoke with millennials who began investing in 2018 — a volatile year for a market that punished investors after more than two years of slow, steady, and nearly uninterrupted gains.
Diving in
For Amber Jamieson, 32, a reporter based in New York who began buying stocks in January, investing has been something of a source of excitement amid the volatility. She said she'd learned to take a step back and exercise patience when it comes to short-term moves.
She was inspired to start investing after finding herself with several thousand dollars after taking a buyout from a job. Jamieson, a Melbourne, Australia, native, felt encouraged to jump in to the market when some of her friends began buying cannabis stocks in Australia. For her first investment, Jamieson bought $600 of Estée Lauder shares, employing the market strategy of "investing in what you know."
The investment has been a loser for Jamieson, with shares down 2% this year after a 65% rise in 2017. Still, she's held on to it and is particularly optimistic on the skincare industry.
"I try to buy things that I feel are not evil companies," said Jamieson, who recently started an email newsletter, "Better Have My Money," in which she discusses her investments.
"And I try to be very thoughtful about — what is the product they're making, or things that they're doing, who's running it, what does this company look like? How diverse is their board, what industry is it in, are they in any kind of scandals, whether that be bosses sexually harassing workers, or how much they're paying workers, or an environment catastrophe — it rules out a lot of companies by trying to be very thoughtful about who they are as companies, whether I would want to give them my money."
Experts say younger investors tend to invest with their personal values in mind. A survey conducted by Nuveen and Harris Poll in mid-2017 found that the majority of millennial respondents were interested in investing in companies deemed socially responsible. A 2017 Morgan Stanley surveyfound similar results.
"Starting now is difficult because of the volatility in the market, and so I think what's important is for individuals to accept what camp are they in," Davin Carey, the managing financial adviser at Carey & Hanna, a California-based advisory practice affiliated with HD Vest, told Business Insider. "Are they trying to be active traders in the market, or are they trying to be long-term investors?"
He added: "While it doesn't necessarily usually end up giving the best long-term performance or is the financial planner's recommendation, I think if you're starting off, especially with a small dollar amount, buying a few shares of something that you have a passion about, that you can track and follow on a regular basis, it's actually a really good way to force yourself to hyper-educate yourself in a short period of time."
App-based investing
Individual investors have turned to apps like Acorns — which charges $1 to $3 a month depending on which plan users choose — and Stash, which is free for the first month and then $1 or $2 a month depending on the account.
Stash says it's seen its customer base double over the past year to 3 million customers. Users who are new to investing seem to dominate the platform, with 86% self-identifying as a first-time or beginner investor. The average user's age is 29, with a household income of about $50,000. Its gender split is about 60% male and 40% female.
Large intraday swings haven't made for significant changes to activity on the platform, said Allyson Federbush, the head of communications at Stash. It has seen "minimal change in net transactions on volatile days," she said.
Cody Carman, a programmer analyst who lives in Illinois, is a fan of Acorns. He began investing in March and transfers $5 a day into the app's "Core" investing platform (where users' money is invested into a portfolio of ETFs), and $5 a day into its "Later" platform (for retirement).
"I was prompted because my brother-in-law does investing too, but is much more involved," Carman, 31, wrote to Business Insider in an email earlier this week.
Coming to terms with crypto
In another corner of the market, investors of all stripes have been drawn to cryptocurrencies over the past year. Bitcoin, the largest digital currency by market capitalization, has fallen 71% in 2018.
Jeffrey Podis, a 24-year old barista who lives in Tennessee and recently finished his bachelor's degree, pulled his money out of crypto in October and added it to his Acorns account.
"I had the misconception at the beginning of the year that crypto would rapidly grow into the sort of information-age stock market, which I think may not be completely wrong but isn't the case presently," Podis wrote to Business Insider, adding he was particularly drawn to Acorns for its free accounts for college students.
Podis said he made a "hokey 'new year's resolution" last year to start setting aside money to perhaps one day start a business. So he started browsing Reddit, seeking out advice, and began investing in February using Acorns, the investment platform Robinhood, and the crypto platform Coinbase. He's drawn to investments that appear to align with his personal ideologies, like Costco.
"My Robinhood account performed almost independently of the market: if a company made a good decision and the subreddit caught it I would invest and pull out when it peaked," he said.
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