A new wave of investors, or collectively known as “Generation Investors”, has spurred into the stock market during the pandemic. Research conducted by the FINRA Investor Education Foundation (FINRA Foundation) and NORC at the University of Chicago found that market dips during the pandemic have made stocks cheaper to buy . This has allowed younger and new traders to start trading with small amounts.
Here at Vantage, on the back of the pandemic, we have seen an actual increase in new and young traders. In an exclusive interview with veteran investor Jim Rogers, we had the chance to ask him for his opinion for new traders, as well as his thoughts on the current state of the market. Here’s what he had to say:
For new traders just starting out on your trading journey, here are the words of guidance shared by Jim Rogers.
- Jim Rogers advises new traders to avoid hot tips and invest only in areas they are knowledgeable about, emphasising the importance of understanding a product or industry before investing.
- Rogers warns of a prolonged and severe bear market with significant company bankruptcies, suggesting that traders hunker down and prepare for a recession.
- On commodities, Rogers holds gold and silver but prefers buying silver due to its historical price advantage, advocating for well-researched investments as a hedge against market risks.
1. Stop looking for hot tips
“Give me a hot tip. I want a hot tip. Please stay away from hot tips. Please invest only in what you know”
Many people think investing is boring, and they would prefer to get a hot tip that will help them to get rich in a week. However, Jim emphasised that rather than relying on hot tips, new traders should strictly invest in something they know a lot about.
Everyone has something they are familiar with, whether it’s cars, fashion, or other products. Investing in something you’re familiar with is how you can have greater success in growing your money. This is because you will be able to have a better understanding of the product, industry, and potential growth of the company,
But what if I don’t have something I know a lot about? Jim’s point of view is to be patient and wait.
As a new trader who does not know anything about trading, it is perfectly fine to do nothing, not enter the market, until you find something that you’re confident about or know fully about. Take this time to slowly learn and acquire more knowledge on the products that you are interested in. It might be a boring process, but this could be a necessary first step to your trading and investing journey.
2. Hunker down for a recession
With the US market on its longest bull-run in history, we got Jim Rogers to share his views about the incoming recession on the horizon.
Here are his thoughts on the upcoming recession:
“This is not a bear market compared to some of the big ones, as I’ve been investing for a long time. In 2008, there was a problem worldwide because the debt was too high. Even China has enormous amounts of debt now, and for the past 25 years, nobody would even lend money to China. Now, the whole world has a tremendous amount of debt, and the US has become one of the largest debtor nations in the history of the world now.
All markets will be affected by this and will go down considerably. Many stock prices will go down 70-80% during this upcoming bear market, and many companies will go bankrupt during the bear market.”
Jim also suggested that the bear market will go on longer than just a few months and will be expected to last at least 3 to 4 years. Bear markets are defined as a sustained period of downward trending stock prices. They are often accompanied by an economic recession and high unemployment .
To help new traders further understand about recession, you can read some of our articles here:
- A guide to recession: everything you need to know
- 5 ways to prepare yourself for a recession
- Here’s how a recession can affect your portfolio
- What assets can you trade during a recession
3. Commodities as an alternate asset class
Everyone wants to hear from the commodities guru, share his insights on commodities. Can commodities like gold and silver serve as a way to hedge against inflation? Do they have a place in this generation’s portfolio?
“Hedging risk is always a smart thing to do no matter what, as long as you know what you are doing, as long as you get it right,” said Jim Rogers.
As the demand for goods and services increases, the cost of goods and services will also rise. The price of commodities that are used to produce those goods and services will also rise.
Here are Jim’s thoughts regarding the commodity silver and gold:
“I own both gold and silver but I’m not buying either at the moment”
If given the opportunity, he would look to buy more silver as the prices of silver are much cheaper on a historical basis. He is currently waiting for things to get more depressed in gold or silver and capitalise on the opportunity to purchase more.
Here are some of Vantage articles on commodities CFD trading to further help new traders understand better:
- CFD Commodities: Overview, How It Works And How To Trade
- Is Gold A Commodity?
- Coffee CFD Trading: Overview, How It Works, And How To Trade
- Oil CFD: How It Works And How To Trade
One final piece of guidance from Jim Rogers:
“If you get the price and fundamentals right, there is less risk no matter what you’re doing.”
No matter the financial securities that a trader decides to purchase, buying at the right prices and conducting proper research on that product can make the trade less risky.
If you’re ready to embark on your trading journey, you can start with a demo account that allows you to practise trading risk-free, with virtual funds of up to $100,000. Alternatively, you can open a live account to start trading the market when opportunities arise.
James Beeland Rogers Jr., commonly known as Jim Rogers, is an American veteran investor, Chairman of Beeland Interests Inc. and financial author who co-founded Quantum and Soros Fund Management. He also launched the Rogers International Commodities Index in 1998.
The views and opinions expressed in this article are those of the interviewee and the author, and do not necessarily reflect the opinions of Vantage. The article is written based upon information the author considers reliable, and Vantage does not warrant its accuracy or completeness, and it should not be relied upon as such. Past performance is not an indication of future results.
- “Investing 2020: New Accounts and the People Who Opened Them – FINRA Investor Education Foundation” https://www.finrafoundation.org/sites/finrafoundation/files/investing-2020-new-accounts-and-the-people-who-opened-them_1_0.pdf Accessed 28 Oct 2022
- “A Brief History of U.S. Bear Markets – Investopedia” https://www.investopedia.com/a-history-of-bear-markets-4582652 Accessed 28 Oct 2022