Next Investors logo grey

Why investors shouldn't bottom pick to beat the stockmarket

Published 22-MAY-2020 12:51 P.M.


2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

In my report two weeks ago, I highlighted some alarming statistics released by ASIC on investor behaviour in the wake of the coronavirus crash.

At this time in March, the stock market was extremely volatile.

In the report, ASIC indicated that new account openings for retail investors were up 3.4 times on previous levels. In addition, there was a marked increase in the number of reactivated dormant accounts. ASIC also reported that there was a sharp increase in retail investors trading short-term highly leveraged markets.

This week BetaShares released its Exchange Traded Fund (ETF) review for April 2020 and, not surprisingly, it reported similar statistics with investors trading ETFs.

The report states that in April investors invested more than $1 billion in new money into ETFs.

It also highlighted that “trading volumes remained very high in April, albeit significantly lower than the all-time record of $18 billion set the month before”.

As you can see, these statistics are consistent with what ASIC previously reported.

Right now, those who invested in ETFs have been rewarded for their decision as the market has risen around 10 per cent since 1 April, although most of that occurred in the first seven days, so those entering after this period have not done as well.

That said, in my opinion, the decision to invest during this time was very premature, as the market was uncertain, very volatile, and extremely dangerous.

The concern is that these statistics highlight two themes that happen consistently with retail investors.

The first is that investors have not learnt and are still attempting to grab a bargain in the hope of making a profit. While this has worked for them so far, depending on how the market unfolds, this may not be the case in a few weeks or months.

The second, and more important issue is that when investors profit from their decisions it creates a false reality, as the majority do not realise the ramifications of their decision to invest.

Given this, they will, once again, attempt to bottom pick in an effort to beat the market, but history dictates that retail investors get it wrong more often and, consequently, lose a lot of money.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.