According to statistics, up to 64% of businesses are struggling financially. The lockdown has ushered in an era of volatile markets and unpredictable economic outcomes. But for some entrepreneurs, it is time to invest in the stock market. Here is a critical look at how the pandemic has affected the stock market, particularly for new investors.
A Profile of New Investors
According to a report by FINRA, the lockdown has attracted younger and more racially diverse entrepreneurs to the stock market. Most of the respondents indicated they were using savings and money from their income. New entrants had small account balances and many investors want to learn trading from the experience.
New investors were more likely to research on their own as opposed to older investors who relied on financial advisers. Again, many aspiring brokers are also looking to improve their skills through education programs such as FINRA exam sponsorship.
Top Reasons for Investing
The biggest reason that got the attention of new investors was the falling prices of stocks in light of the pandemic. The low minimum and no-minimum investment accounts removed barriers, making it possible to invest small amounts of money.
The other reason is saving for retirement. The volatile market prompted younger entrepreneurs to consider their prospects as the unemployment rate continues to rise. Among minorities, the biggest factor influencing investment decisions was a suggestion from a friend or family.
New Investors and Product Profiles
Young investors are also using a variety of facilities to buy stocks. The report shows 51% of investors were aiming for commission-free trades. About a third of the same group were interested in fractional shares. Fractional shares allow an investor to buy shares at a fraction of its price.
Another alternative is margin trading which involves lending money from a broker dealer to buy stocks. Almost half of all account holders were unaware of margin trading, according to the report. However, new entrants were less likely to choose options than experienced entrepreneurs.
Investment Decision Making
The vast majority of new investors sought information from peers, family, and work colleagues. The second leading source of information was the company’s annual report. Even though the information was acquired from websites and mobile platforms, most entrepreneurs were reluctant to approach an online broker dealer.
FINRA Risk Monitoring Programs
The changing regulations have compelled the financial authority to improve the monitoring of FINRA exam sponsorships and other aspects of the program. In total, FINRA has identified 18 areas of concern. They include cyber security, communications, and execution.
At this time, it is essential to understand the regulations for trading and investment banking licenses. Brokers have to streamline regulatory compliance to save time and resources. A relationship established through a FINRA exam sponsorship can give new entrepreneurs exposure through industry professionals and help you get a FINRA investment banking license.
The pandemic has created a volatile economic environment that is difficult to predict. Now more than ever, investors need competent advisers, financial analysts, and broker dealers to manage risks. FINRA exam sponsorships are organized by the non-profit organization to allow individuals to become licensed security professionals or certified broker dealers.