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Yet another behavioral shift brought to you by the pandemic is the surge in stock trading by everyday investors.

My theory is that the surge in stock trading by retail investors would not be happening without the pandemic keeping people at home, bored and looking for excitement. I wish these investors all success, but I also worry about them. The stock markets have a way of turning winners into losers in a flash.

I wrote about the crush of investors using online brokerages to trade stocks recently. Now for a fresh sign of investor exuberance – Google searches about stock trading. Semrush, a company that analyzes data trends, says that searches for “stock trading” were up 128 per cent last year, searches for “hot stocks” were up 233 per cent and searches for “how to buy stocks in Canada” were up 241 per cent.

Yet another indicator of retail investors getting overly enthusiastic is the rise of borrowing money to buy stocks – margin investing, in other words. A U.S. analyst has tracked the amount of margin debt compared to the size of the economy and concluded that the current level of speculation in stocks “dwarfs anything seen in modern times.”

It’s not just stocks that people are taking an interest in during the pandemic. Semrush reports a 175-per-cent rise in searches about cryptocurrencies in 2020.

Stocks and cryptocurrencies have so far delivered for the people who bought them during the pandemic, and there could be more upside ahead. But anyone holding these assets right now needs to consider the risk of a sharp, sudden reversal at some point. The more intense people get about investing, the bigger the risk of pain ahead.

What does the surge of speculative trading mean for the broader stock market? You’ll find some strong, rational analysis in this recent commentary by a veteran investing strategist. He says that some sectors do look overheated, but there aren’t many parallels between current financial market conditions and those in place during previous bubbles. “Looking ahead, the best hedge against a bust in some speculative investments is to build globally diversified strategies based on longer-term outlooks.”


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Rob’s personal finance reading list

Stories about soaring house prices, Part One…

What might the housing market look like if recent price-growth trends continue? Here’s an analysis that pegs the average price in 2050 at $3.3-million to $7.6-million. What we end up with is “either an unprecedented housing market crash or unimaginable levels of wealth inequality.”

… and Part Two

A Reddit post by a 30-something home buyer who said he paid $450,000 over asking for a house and blames his realtor. My takeaway is that fear of missing out is causing big problems in the housing market.

What Canadians think about the GameStop story

A minority of people follow the financial markets on a daily basis, but the story of small investors scooping up the shares of troubled video-game retailer GameStop to battle hedge funds has moved into the mainstream.

Valentine’s Day on the cheap

Wait, that sounds bad. How about, some cheerful, frugal suggestions for a fun COVID-friendly Valentine’s Day?

The need-to-know guide to taxes and work-from-home expenses

A look at the ways people working from home can claim expenses such as internet, heat, hydro and rent.


Ask Rob

Q: Can you explain how U.S. taxes work on ETFs and stocks? My son is thinking of opening a trading account.

A: Try this ETF tax guide I put together as a companion for the ETF Buyer’s Guide I do every year (the 2021 guide starts rolling out Feb. 12). Information on taxable accounts, RRSPs and TFSAs.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.


Today’s financial tool

A summary of benefits and tax credits available to students from the Canada Revenue Agency.


The money-free zone

I just came across the music website SecondHandSongs. Just keep clicking the “shuffle” button to hear original versions of songs and a cover version. Dionne Warwick’s version of I Say a Little Prayer or Aretha Franklin’s? Bessie Banks’s version of Go Now, or the one by The Moody Blues?


ICYMI

What I’ve been writing about

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