| Many are chasing the stock market by day trading in the pandemic. It could end badly | | |  | WED, SEP 23, 2020 | | | | Working from home and bored with lots of free time, many people are turning to the stock market and dabbling in day trading for entertainment and profits during the pandemic. In fact, TD Ameritrade reports that visits to its website giving instructions on trading stocks have nearly quadrupled since January.
On the surface, day trading may appear like an easy concept. Jump in and out of trades as the price moves, make a little profit, rinse and repeat the entire process tomorrow. Sounds simple, right? Just kidding. Let's be honest, trying to make a profit by buying and selling individual companies over a short period of time can backfire. I am being brutally honest when I say that many "newbie" day traders do not have the wealth, the time, or the temperament to make money and to sustain the losses that day trading can bring.
Ask yourself this question: do you truly understand the amount of risk you are taking?
Before you decide to jump in and do a little day trading, consider these points: Day trading is not for everyone; it's not a get-rich-quick scheme; it's a tough, high-risk way to make a living; it certainly isn't for the faint of heart; and many may not be prepared for how much money they can lose with the trades they're making.
However, if you truly want to do some day trading, financial experts suggest the best thing to do is to only invest a small amount of your money to learn whether you have the skill set to beat the market. In another words, just dip your toe into the water.
Doug Boneparth, a certified financial advisor, recommends that investors who want to dabble in the market should set up an "opportunity portfolio," between 5% and 10% of their investable assets designated to picking individual securities. With that money, they can invest in individual companies and it can prevent doing too much damage, he says.
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For more key stuff like this, please follow me on Twitter @jimpavia and check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow.
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