rtmark
LearnBonds.com

Leave stock bubbles to day traders, says UBS

Charles Day, managing director and wealth advisor at UBS, has warned rich investors they should avoid exotic and hot stocks, citing the big risks associated with investing in little-known firms.

“The stocks that I hadn’t heard of three months ago all of a sudden are the most active — that’s not where investors go, that’s where day traders might go or hobbyists might go”, Day told Bloomberg. The Swiss bank controls $2.3trn in assets for wealthy clients.

He pointed to companies such as Nikola Corp (NKLA), an electric truck manufacturer, which has emerged out of the blue, attracting the interest of less experienced investors despite its lack of results.

Day added: “If you’re a wealthy investor, you have to avoid thinking that you’re missing out on huge returns in these stocks”.

The S&P 500 is up more than 30% since hitting March lows, partly driven by day traders, such as those on the commission-free brokerage Robinhood, who pounce on companies with little or no profit and send their stock price surging.

Unheard-of stocks and risky plays have been popular in the stock market lately, as a large number of day traders and mom-and-pop investors have flocked the markets during lockdown, in hopes that they can cash in on the recent volatility caused by the coronavirus outbreak.

Experts have consistently warned about the potential consequences of taking big risks during times of extreme uncertainty, highlighting cases like Hertz, a bankrupted car rental firm whose shares skyrocketed despite the fact that the company had sought Chapter 11 protection from its creditors.

Nikola Corp, one of the stocks cited by Day, has seen its stock grow six-fold since its inception in January, with the stock moving from $10 per share to nearly $70 per share only this year, even though the electric vehicle maker has little to no sales and has generated losses every single quarter since the stock was launched.

Day compared these recent actions with the likes of what happened during the 2000 dot-com stock market bubble “when obscure companies were doubling and tripling monthly”, followed by a sharp sell-off prompted by a wave of bankruptcies of these so-called “hot” tech firms.

The UBS advisor recommended wealthy investors to take refuge on blue-chip growth stocks in the retail and technology sector, while also pointing to cash and gold as potential safe harbors during times of extreme financial turmoil.

“If you’re very wealthy, what you want to have is some protection of your downside so you feel more comfortable with your risk assets”, said Day.

Trusted & Regulated Stock & CFD Brokers

Rating

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission on real stocks

Rating

64 traders signed up today

Visit Now

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

Rating

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
Users should remember that all trading carries risks and users should only invest in regulated firms. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.