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Life, as we know it today, is very different from how it used to be during the pre-pandemic days. In the working world, trends such as work-from-home (WFH) and The Great Resignation have become the focal point for discussion (and disagreement) for many companies and their workers. In education, home-based learning has taken center stage with teachers and parents having to cope with how education is delivered to students.
In the investing and trading world, notable trends and changes have surfaced over the past two years including the rise in popularity of meme stocks (e.g. GameStop and AMC) and the proliferation of cryptocurrencies and NFTs.
Whether it’s the often-used millennial acronym YOLO (you only live once) or FOMO (fear of missing out) that is driving the market, or a paradigm shift in the way the financial markets operate, there is no question that there will be new opportunities and dangers as financial markets evolve.
In this edition of #TheNewNormal, we chat with Dawn Cher, founder of Singapore’s leading financial blog, SG Budget Babe, to find out more about how the investing and trading landscape has transformed over the past couple of years.
Timothy Ho (Timothy): You started SG Budget Babe in 2014 and your blog has grown in popularity over the years. Have you observed an increase in interest and traffic on your site since 2020? #TheNewNormal
Dawn Cher (Dawn): Yes. There have been more people, who are new to investing following me. It seems like the pandemic got a lot of people interested in, and started, investing and trading.
Timothy: Why do you think many individuals, including younger people, are drawn towards investing and trading over the last few years?
Dawn: One reason would be the extra time on hand. With lockdown and leisure travel suspended, people have more time to focus on other interests which they aren’t able to do so pre-pandemic, or just something to distract themselves with. Many also see that starting to invest or trade can be part of self-improvement, as one learns about how to make their money work for them.
The second reason could be due to the rapid growth of finance influencers on social media platforms like YouTube and TikTok over this same period, which has brought about greater awareness in trading and investing.
Timothy: What are some of the most popular topics that new investors or traders are gravitating towards?
Dawn: A lot of new investors tend to make the mistake of chasing the hype, in the hope of quick wins. We have seen meme stocks as well as high-growth technology stocks that bring about a sexy narrative becoming the centre of attention. Peloton is one such example. It hit an all-time high of US$162 in December 2020, only to fall 85% by January 2022 – back to its pre-pandemic levels. (Editor’s Note: Share Price of Peloton (NASDAQ: PTON) is US$20.39 as of 22 April 2022). There was less focus on studying the fundamentals and financial health of the company, and valuations have been pushed to sky-high levels based purely on speculation. As such, we’ve seen a major correction in the share prices of these stocks over the last few months.
For traders, these don’t really matter because they trade in and out more frequently. So as long as they put in certain rules on profit-taking and stop-loss measures, the fundamentals of a stock (or crypto project) matter less.
Cryptocurrencies have also become increasingly popular, which I believe is due to the high-risk, high-return sentiments, and generally do not require any minimum capital to get started. I used to teach General Paper tuition to my JC students, and even they have started dabbling with cryptocurrencies.
Timothy: The financial market is both a lucrative and dangerous place. What are some common mistakes that you see new investors and traders make?
Dawn: Chasing hype, not doing their due diligence before they put their money in, and simply acting on stock tips or “ape-ing” into a crypto project because someone they know (be it in real life or online) shilled it.
Timothy: Everyone wants to generate profits but learning how to invest and trade well isn’t easy and would take time and experience. What is some advice you will give to a person who is making his/her first trade?
Dawn: Take care of your downside, and the upside will take care of itself.
It takes more than a pandemic (or over-stretched valuation) to kill a good company (or crypto project). Focus on quality rather than chasing returns. Often, when you chase after hyped stocks, you could very well end up becoming someone else’s exit liquidity.
Timothy: You launched SGBB Investment Academy in 2020. What were the reasons for starting this online academy and what are some of the most popular courses that your readers sign up for?
Dawn: Many of my followers have asked me to teach, so I’ve been running a yearly readers’ workshop on how to invest ever since 2016. We were just about to hold our 2020 workshop when the pandemic hit. Because of how fast the virus was spreading at that time, I felt it would be irresponsible to continue with a physical workshop, especially if one of the attendees happened to be asymptomatic and contagious. So, I cancelled it, much to everyone’s disappointment.
Eventually I decided to do an online course instead, from which people can join and learn at their own time and pace. I spent several months tweaking the course materials and recording the content, even up till 4am on most days after my kid slept.
The most popular course is the introduction to index investing (S$49.90), which many new investors take so that they can understand how to invest in ETFs and Robo-Advisors better. But the all-time favourite is the Strategic Investing Masterclass (S$799) because I teach six strategies all within a single course – investing in ETFs and unit trusts, bonds, dividend stocks, REITs, finding undervalued stocks and when to sell them, high-growth stocks, fundamental analysis and behavioural sentiment, as well as portfolio management and asset allocation.
Timothy: Suffering losses are a natural part of our investment and trading journey. How do you deal with volatile periods like February to March 2020, where the markets were down by about 30% in a month, or earlier this year where Chinese Tech companies took a huge beating?
For me, I ask myself this question – what changed? Does it break my thesis?
If the answer is no, then I just keep calm and carry on, because I know that fundamentally strong companies will recover in due time. Oh, and it helps when you don’t look at prices every day!
Be An Informed Investor And Trader
More than two years have passed since the pandemic hit us. As shared by Dawn, and from what we can observe around us, many people have started investing and trading during this period. You might even be one of these individuals, having just placed your first trade in the last two years.
Wanting to invest and trade to grow our capital is a good goal to have for ourselves. However, as we invest and trade, we must ask ourselves, how are we learning to become better investors or traders?
A simple way to get started is simply to gain knowledge by reading. Websites such as DollarsAndSense.sg, SG Budget Babe and Seedly are sites that we can regularly visit to improve our finance knowledge.
For those who wish to specifically learn more about trading, the IG Academy is a good place to get started. There, we can access free webinars, online courses and live sessions. Through IG, we can also open a demo trading account so that we can practice trading using S$200k virtual funds first before opening a live account.
As a trader, risk management is an important aspect of trading that we cannot ignore. As Dawn shared, we need to take care of our downside, and let the upside take care of itself. When we trade using instruments like CFDs, leverage could be used. The use of leverage means that we need to manage our risk carefully. For example, we should put guaranteed stop for all our trades so that we do not run the risk of losing excessive capital on any particular trade. CFD brokers such as IG offer such services to help traders execute their trades in a timely and accurate manner. Other risk management tools we can use include trailing stops and knock-outs.
Lastly, through IG, we can enjoy 24-hour trading across asset classes such as equities, forex, and commodities in more than 17,000 global markets. It’s important for us to be familiar with the markets that we trade in, and we can do so by following the news and trade ideas written by IG market analysts.