Monetary advisers clarify the hazards of treating shares like Sports activities Betting – CBS Pittsburgh

PITTSBURGH (KDKA) – There’s new information on the young investors fueling what was billed as David Against Goliath Trade War

Investors make money as stocks continue to rise, but some see danger for them and the market.

Andrew Kocay, a student at the University of Pittsburgh, belongs to a new generation of so-called Robinhood investors, whose ranks have now grown to 13 million, mostly Millennials or even younger Gen Zers, who suddenly buy and sell stocks through the app.

“When you download the app, it asks for basic information and a small deposit, and it’s really easy to invest in things,” said Kocay.

Ease for some, but danger in the eyes of others. Over the past six months, these young investors have been a major driver of the dizzying surge in equity markets. Robinhood investors have helped bring stocks like Tesla and Bitcoin Cryptocurrency to offer by more than 400 percent. And just this week, GameStop’s price has quadrupled in just three days – large hedge funds that sold the stock to the cleaners caused general concern on Wall Street.

“It combines the elements these young people are used to,” said financial advisor Rick Applegate. “The handheld phone, the gamification, all the graphics make it interesting and fascinating. This may be good in some ways, but the end result is very dangerous. “

Advisors say, despite the warnings, young investors are pushing for the man’s mantra some call their pied piper. David Portnoy is the founder of Barstool Sports and credits himself with starting the movement. When the sport shut down last April and he could no longer bet on games, Portnoy began day trading very publicly.

“Take part in the revolution. Start buying, don’t sell. COVID that, COVID that. No, stocks are just going up, ”he said.

“So people think that the market keeps growing and there is no risk. There’s a risk, ”said Applegate.

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After Portnoy’s leadership during COVID, young investors like Kocay simply jumped off sports gaming sites on Robinhood, and Applegate fears their stock picking is just another form of gambling.

“Where they would bet $ 10 on a game and check the next day to see if they made any money, now they do it with stocks. That doesn’t invest. It’s gambling, ”said Applegate.

In a statement to KDKA, Robinhood said it was a democratized investment for a new generation.

“We designed Robinhood to be mobile and intuitive, with the aim of making investing more familiar and less daunting for a generation of people previously cut out of the financial system,” said Robinhood.

In addition to so-called “pump-and-dump” programs like GameStop, these young people are venturing into more exotic forms of investing like options trading.

“You will get into a situation that will cost you a lot of time,” said Applegate.

But Robinhood says it empowers young investors to build wealth – once the province of the rich.

“Our focus has always been on removing systemic barriers to investment in order to help more people take control of their finances,” said Robinhood.

Kocay says he’s a little gamer and turned a few hundred dollars into about $ 1,500 for now. He heard the warning but believes he’s got everything in check.

“There are always ups and downs, but you just have to survive and eventually it will pay off for you,” he said.

But now these young investors are at odds with federal regulators and Robinhood, which limited their options to buy GameStop earlier this week, but KDKA’s Andy Sheehan said they were in the fortress market.