‘Picking stocks isn’t a game … it’s really hard’

Advisor welcomes new investors to the market but says the majority of the population need financial advice

‘Picking stocks isn’t a game … it’s really hard’

After GameStop’s shares dropped 20% as the Reddit saga rumbled on yesterday, one advisor has warned DIY investors that the stock market is "not a game".

Rob McClelland, senior financial planner of The McClelland Financial Group, Assante Capital Management Ltd., compared the recent meme stock phenomenom to a fight breaking out at a sporting event – it shouldn’t happen, and it doesn’t really affect that many people, but there are isolated incidents.

The growth of the likes of Robinhood, however, has opened up the market to retail investors at the click of a button, and McClelland, in the second part of his interview with WP, explained why he believes that many people who used to bet on sporting events have shifted their thrill-seeking focus to the stock market.

He said: “Most of the money is pretty small, although we're always going to hear the horror stories about those that lost $10,000 or $20,000 and didn't have that money to lose.

“At the end of the say, they’re trying to play a game against Wall Street – and it’s a dangerous game to play. Wall Street has years of experience of doing this; they have lots of money behind them and they don't like to lose that money.

“In the end, Wall Street will come out with more winners than losers and Main Street will have some winners, definitely, but most will end up losing money. The stock market shouldn't be a game but from time to time, those things happen.”

That a $5 stock hit $264 – at time of writing it was $210 – is “ridiculous” and he believes it's fortunate it hasn’t spread too far at this point.

"I don't see it impacting the market whatsoever,” he said. “It's good that you've got a bunch of new investors in the market, and the best thing you can do as a young investor is lose money. How hard is picking stocks really? It isn’t a game and it’s really hard. It's why I don't believe anyone can pick stocks successfully over a long career; I’m more of a believer in the market, not the individual investor.”

While an obvious conclusion – and admittedly one-eyed given this publication – the GameStop issues has reinforced some people’s need for advice. McClelland said that, over a 30-year career, he’s seen all clients at some point in their life want to do “crazy things” that make no sense and risk their hard-earned savings. That’s where an advisor earns his keep.

He believes about 10-15% of the population don’t need advice but that the rest do, whether that’s on portfolio management, tax planning or issues around retirement planning.

“My father was a book publisher and was actually a really good writer. His son? Not so good! I just don't have that skill set. Advice is the same thing - I've been doing this a long time, I know I've really helped my clients a lot – and they appreciate it. I don’t think advice is disappearing, regardless of how good the technology gets.”