Moneycontrol

Budget 2021

Associate Partners:

  • SMC
  • Samsung
  • Volvo

Moneycontrol

Budget 2021

Associate Partners:

  • SMCSamsungVolvo
Webinar :Join an expert panel for a webinar on Smart investments for a secure retirement January 28, 2021. Register now!

'Retail investors in 'buy mode' even as institutional entities search safer havens during sell-off'

Based on data from Fidelity and Vested, it seems like investors have been lapping up popular brands such as Apple, Amazon, Tesla, and Microsoft as these mega-caps have tumbled off of record highs.

March 28, 2020 / 02:43 PM IST

Viram Shah

It is being said that during this 21-Day lockdown in India, there are two key topics of discussion among people: a) the COVID-19 and the other is, b) markets.

This does seem well justified given the large-scale damage the Coronavirus is causing to people’s health as well as in markets.

Fear of the global impact of the coronavirus has sent markets on a downward spiral over the past few weeks. Though the government stimulus announcements helped stage a mini-recovery over the last few days, the Sensex is still down 27.2 percent over the last three months while the S&P 500 is down 18.8 percent.

The S&P 500 hit the lower circuit breaker for the first time since 1997 on March 9th and since then it hit the circuit breaker 2 more times in six trading days.

Close

Given the unpredictability of the economic impact of the coronavirus on companies, institutional investors are looking to move away from equities into safer assets such as US treasuries.

This can be seen in the short-term treasury yields as they turned negative for the first time in more than four years on March 25th.

Given that US government bonds or Treasury bills are the safest assets in the world, they are in high demand during times of volatility.

Retail investors in buy mode:

However, an interesting trend that has emerged during this downturn is that while institutional investors have been rushing towards safer havens, retail investors have actually been calmly buying stocks during this sell-off.

According to data from Fidelity and Vanguard, two of the biggest brokers in the US, their individual clients have shown no signs of panic.

For example, approximately 1 percent of the US Vanguard households traded each day over the last two weeks versus 0.4 percent trading on each typical day.

On March 9th, Fidelity saw a buy-to-sell ratio of 2.11 to 1 even though the market dropped by 7 percent. Even more, interestingly, Indian retail investors have also been increasing their exposure to the US markets over the last few weeks.

For example, at Vested we have seen a 4x increase in funds deposited on our platform during this quarter compared to the last quarter. In the last week alone, we saw a 65 percent increase in weekly accounts opened.

While this increase could be related to investors looking to invest abroad before their annual LRS limit expires on March 31st, a large portion of investors mentioned that their reason to start now is that the crash gave them a good opportunity to start investing in the US market.

What are these investors buying?

Based on data from Fidelity and Vested, it seems like investors have been lapping up popular brands such as Apple, Amazon, Tesla, and Microsoft as these mega-caps have tumbled off of record highs.

Along with these stocks, the index ETFs such as Invesco’s Nasdaq 100 ETF QQQ or iShares’ S&P 500 ETF IVV has also seen strong interest.

While it is indeed encouraging to see increased retail investor participation during such times, a word of caution – timing the market and hoping to get it right is next to impossible.

It would be prudent to create a well-diversified portfolio and continue to hold it for a long period of time to be able to grow one’s wealth over the long-term.

(The author is Co-Founder & CEO, Vested Finance)

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol Contributor
first published: Mar 28, 2020 02:38 pm

stay updated

Get Daily News on your Browser
Sections