Last week The Motley Fool reported an amazing 435,000 Australians joined the share market last year as the COVID-19 pandemic struck.
But all those rookies who did so well out of high-growth technology shares would now be experiencing losses for the first time.
The general market has been down in the past month, but the S&P ASX All Technology Index (ASX: XTX) especially has suffered — dropping almost 16% since its 11 February peak.
So this would beg the question: will the newbies get anxious and flee, or will they stay the course?
Marcus Today director Marcus Padley reminded rookies that the market they entered is highly unusual.
"If you are new to the stock market and have been successful, know your limitations," he posted on Livewire.
"You are making money in one of the regular but rare stock market booms. You are in a sentiment bubble. It is not usually this easy. It is not usually this volatile."
Australians usually talk about real estate, not shares. So the fact that there is public discourse indicates that we're in a bubble, but not in the traditional sense.
"People do not usually talk about the stock market at 19. People do not usually talk about the stock market on the practice putting green," said Padley.
"This is a sentiment bubble. Not a stock market bubble — a bubble in attitudes about some (not all) prices. It's different to a stock market bubble. It is confined to some very popular stocks — are these the only stocks you hold?"
Image source: Getty Images
Was it dumb luck or actual skill?
Much like The Motley Fool's favoured "buy and hold" strategy, Padley said that most of his clients are long-term investors.
He said those people would not have fretted about last year's rise or this year's dip.
"I am talking to you guys on the putting green. To my daughter's 19-year-old friends who have fabulously risked and won, who have turned their JobKeeper money into a small fortune," he said.
"Look at how much money you've lost in the last two weeks playing in the volatile 'sexy' (now unsexy) end of the market (BNPL) and ask yourself: Do I have any edge at all other than participation at the right time?"
According to Padley, the rookies that can honestly answer that question will know whether to flee or stay.
"The herd is huge, it'll return as soon as it left, and it is far easier to reinflate an old balloon than blow up a new one," he said.
"For all of you out there now losing your gains for the first time, wondering whether you should have sold, not knowing whether you are investors or traders — and especially for those of you who have become stock market know-it-alls in the last couple of months of easy money — you have to decide what you want to do from here."
