aurora cannabis stock –

A reverse stock split can benefit a corporation and an investor. This TradingSim article will explain what that action is. In addition, this article will also explain how reverse splits from large corporations benefit new investors. Also, this article helps investors to rebalance their portfolios in this bear market. This article can also help investors improve their trading strategies.

What is a reverse stock split?

A reverse split is a corporation’s decision to reduce the number of its existing shares. With that action, a company splits its stock into fewer shares. Because companies sell fewer shares to investors, they enable certain actions. When a corporation has reverse stock splits, companies make their shares more valuable.

Why do companies reduce shares to sell investors?

When a corporation has a reverse stock split, there are many reasons for that decision. When a corporation’s stock falls, it’s in danger of a delistment from the New York Stock Exchange. If there’s a delistment, a stock becomes a penny stock. To avoid that fate, a company makes fewer shares available to raise the share price. Stockholders vote to approve the measure.

While corporations have reverse stock splits because of negative reasons, there are positive reasons as well. If a corporation plans to have a spinoff company, a company can reverse split its shares to increase share price. Then, a corporation can spin off into another company to gain a higher share price.

What different kinds of reverse splits exist?

Just as stocks have different prices, some reverse stock splits have different ratios. For example, a company has a 100:1 reverse stock split. In that case, every 100 shares a shareholder has converted to one share.

In one example, an investor can have 100 shares of a company at $10 a share. After a reverse stock split, every 100 shares changes to one share.

With 100,000 shares before the stock split, the market capitalization is $1,000,000. With a 100:1 split, there are now 100 outstanding shares.

The calculation is as follows:

1,000,000/100-1,000.

Each share is now worth $1,000.

Does a reverse stock split affect a company’s worth?

While a reverse stock split may change an investor’s perception of a company, it doesn’t affect a company’s overall value.

Ryan Sterling is the founder of Future You Wealth in Manhattan. He noted that a company’s reverse stock split changes “are cosmetic. “They don’t say anything about the fundamentals,” added Sterling.

He also said that any psychological benefit from reverse stock splits is short-lived.

“Any enthusiasm you feel from a stock split, I would take with a whole lot of caution. When you talk about money in the stock market, the biggest eroder of wealth over time is human emotions,” said Sterling.

How is a reverse stock split different from a stock split?

While a reverse split means fewer shares for investors, a “regular” stock split does just the opposite. When a company takes that action, they make more shares available to investors. In a recent example, Apple recently announced it would have a stock split in August. Through a statement, the tech company made the decision to “make the stock more affordable to a broader base of investors”.

In Apple’s 4- for- 1 stock split, four shares sell for the price of one. As a result, if investors buy Apple stock at $ 400 a share. In this new 4-for-1 split, investors can buy one share for about $100.

Is a reverse stock split bad for investors?

Conceptual business illustration with the words stock split

When corporations have reverse stock splits, they sometimes have negative consequences. Financial expert Bill Matthews had one example of a company’s stock falling after having a reverse stock split.

“I was talking with a friend about a stock that he had bought at $1 per share. Shortly after he bought, the price fell to $0.50. A few months later, he received notice that the company was planning to implement a 1-for-10 reverse stock split. He was wondering if that reverse stock split was a good or bad thing,” said Matthews.

“According to the company’s press release, the reverse stock split of 1 for 10 would bring the stock price up to $5 per share, and that would prevent the stock from being delisted from Nasdaq. I ran into my friend a few weeks ago and asked about the stock. The stock, which was selling at $5.00 after the reverse, is now selling at $1.25 and he is down 88%,” added Matthews.

“In this case, the stock moving from $0.50 to $5.00 overnight was just an accounting ploy. The company still had very shaky fundamentals. Savvy institutional investors won’t invest in the stock just because its price suddenly soared, and it will have a hard time raising capital if its balance sheet is poor,” said Matthews.

“Shorters, who follow reverse stock splits and target those stocks, began to put pressure on the stock price, sending it tumbling. As selling pushed the price downward, other investors panicked and sold, causing the price to plummet even lower. As my friend discovered, a reverse stock split is normally not good news for shareholders,” added Matthews.

What should investors do when a company has a reverse stock split?

When a corporation has a reverse stock split, Matthews advises investors to review a company’s balance sheet if it reduces available shares.

“If a stock in your portfolio announces a reverse stock split, take a good look,” said Matthews.

research in dictionary — Investors must conduct research when company has reverse stock split

Matthews notes that if a corporation’s “fundamentals aren’t healthy, you might be better selling your shares. If you really like the stock, chances are good that you can buy back those shares at a much lower price several months down the road.”

However, if a company’s balance sheet and past earnings reports are strong, Matthews notes that investors should hold those stocks.

How does Apple stock split affect investors?

As a result of Apple’s split stock decision, many financial experts see it as a good sign. Caleb Silver is editor-in-chief of Investopedia. After Apple’s announcement, he believes that Apple’s decision will attract more investors to its stock.

“For popular stocks like Apple, the lower share price makes it attractive to investors who couldn’t afford higher share prices but want to own a piece of the company. Stock splits are seen as a sign of confidence from a company,” said Silver.

In addition, he added that Apple’s stock split is “considered a response to more demand for its shares from investors.”

Apple stock has stock split in contrast to reverse stock split — Apple has stock split in contrast to reverse stock split

Sterling doesn’t think that Apple’s stock won’t be affected by the stock split. He believes it “effectively increases demand for people who don’t understand fractional shares,” Sterling said. “If anything, it causes more volatility in the stock.”

Will Apple’s stock split impact the stock market?

While Apple’s stock split is gaining attention, financial experts say it won’t change the company’s value. Max Gokhman is head of asset allocation at Pacific Life Fund Advisors. He doesn’t think that the stock splits will affect its share price.

“To be crystal clear, however, and as proven by grade school algebra, stock splits have no impact on the value of a company,” said Gokhman.

Financial editor Ric Edelman also thinks that Apple’s value won’t be affected by the recent stock split.

“This is not a financial event and has no economy implications or bearing on the value of the investment or the outlook for Apple as a business. It’s a non-event,” said Edelman.

“This is a huge event from a psychological perspective. That’s the reason companies engage in stock splits — they know it plays on the emotions of investors,” added Edelman.

Edelman also advised investors to ignore Apple’s stock split and invest in other assets.

“You should ignore this and instead invest in diversified stock mutual funds,” said Edelman.

Rite Aid stock rises after reverse stock split

Rite Aid (NYSE:RAD) is a company that had a reverse stock split in 2019. The pharmacy chain made the decision to avoid a delisting from the New York Stock Exchange. Rite Aid’s stock was in danger of falling below $1 before the reduction of available shares.

As a result, Rite Aid had a 1-for-20 reverse stock split. Every 20 shares of Rite Aid stock is converted into one share. The share will be 20 times the original price. While the stock briefly rebounded after the split, the coronavirus crisis caused Rite Aid shares to increase.

In addition to being part of a White House COVID-19 response group, Rite Aid is expanding its services. Many pharmacy locations will also be coronavirus testing centers.

While Rite Aid will expand services, the company noted in a statement that its “current supply of generic medications is presently sufficient and the company does not anticipate any significant near-term supply chain disruptions that will affect its ability to fill prescriptions.”

Rite Aid’s Q1 2020 earnings rise above expectations after reverse stock split

Rite Aid’s Q1 2020 earnings report exceeded Wall Street expectations. In the last quarter, revenue was $6.03 billion. That’s an increase from $5.37 billion in Q1 2019. Rite-Aid’s CEO, Heyward Donigan, spoke about the positive results.

“There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and increased costs incurred to assure the safety of our associates and customers. No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic,” said Donigan.

growth stocks — Rite Aide stock grew after its reverse stock split

“I am amazed by the passion and spirit of our more than 50,000 associates, who have come to work every day driven by a desire to help customers stay healthy and demonstrating the essential role of pharmacy in our communities,” added Donigan.

Donigan also spoke about the importance of Rite-Aid’s pharmacists and new initiatives during the COVID-19 era.

“Thanks to their hard work, the fundamentals of our business are strong, and we are right on track with the launch of our new RxEvolution strategy. I am excited to continue this important work as we look to become a leading mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences,” said Donigan.

Rite Aid’s reverse stock split ultimately brought the corporation from the brink of bankruptcy.

Booking Holdings survives reverse stock split

Bookings Holdings(NASDAQ:BKNG) is another company that survived after a reverse stock split. When the corporation was still called Priceline, it made a decision to have a 1-for-6 split in 2003.

COVID-19 affects Booking Holdings Q1 2020 earnings

While the online trip booking company rebounded after its reverse stock split, coronavirus disrupted that growth. In its Q1 2020 earnings report, Glenn D. Fogel spoke about Booking Holdings’ disappointing results.

“Revenue declined 84% versus last year, and we recorded an adjusted EBITDA[ earnings before interest, taxes, depreciation, and amortization] loss of $376 million, the first time we have produced a quarterly EBITDA loss since 2001. We witnessed the greatest negative impact from the virus in April as newly booked room nights in that month declined over 85% year-over-year,” said Fogel.

While travel declined during the worldwide quarantine, Fogel noted that Booking Holdings’ revenue improved slightly. He noted that trip bookings rose after the economy opened up again in late spring.

“After April, room night trends have steadily improved. The improved booking trends were primarily driven by domestic travel, with international trends seeing much more limited improvement,” said Fogel.

“While almost all of our global markets showed improvement through the quarter, Europe and the United States had the highest contribution to the improved domestic booking trends,” added Fogel.

Some financial experts bullish on Booking Holdings after reverse stock split

When the U.S. State Department lifted global restrictions, Booking Holdings stock increased 1.5%. Steve Chiavarone is a portfolio manager and equity strategist and vice president at Federated Hermes. He noted that the Booking Holdings stock bump may not last because Americans are still afraid or unable to travel.

“But you still have restrictions on Americans coming in, and I think ultimately, people aren’t just staying home because of mandates. They’re staying home because they’re worried about their health,” said Chiavarone.

“I think for a lot of reasons, you’re still going to see travel levels down. I think you’re still going to see a preference for domestic travel. But, hey, incrementally, the idea that there are parts of the world that have gotten coronavirus under control enough that we can start to lift restrictions, that’s a good thing,” added Chiavarone.

Some financial experts are bearish on Booking Hearings stock

While some analysts are bearish on Booking Holdings’ stock, Broyhill Asset Management is bullish on the company’s stock. In a letter to clients, Broyhill Asset Management thinks that Booking Holdings will survive the coronavirus-caused decline in trip bookings.

“During the quarter, we also built a position in Bookings (BKNG), which we had been watching long before the crisis began. For the past three years, the stock has been under pressure due increasing concerns about the company’s competitive positioning—in relation to both hotel loyalty programs and Google’s search engine,” said Broyhill.

“And although Bookings will likely suffer in the short term, its more entrenched European business, combined with its strong balance sheet, should make it among the best-positioned companies throughout the travel sector,” added Broyhill.

While Booking Holdings has difficulty now, the reverse stock split ultimately benefited the company.

Grow Capital reduces available shares

Grow Capital(OTCQB:GRWC) is a corporation that incubates fintech companies. The company recently announced that it’s implementing a 1-for-20 reverse stock split.

The company is implementing the reverse stock split to increase its trading price to $4.00. Once the stock price reaches that threshold, it will meet NASDAQ’s required bid price. Grow’s interim CEO Terry Kennedy spoke about the changes in a statement.

“This reverse split will help GRWC normalize trading and better align with our business activity. Our subsidiary is growing and we have new acquisitions on the horizon. Issuing this reverse-split is expected to raise our per-share price and allow for better long-term planning,” said Kennedy.

Grow’s board president James Olson also spoke about the reverse stock split.

“The Board believes it is in the best interests of GRWC and the stockholders to implement the Reverse Stock Split to reduce the number of our issued and outstanding shares of common stock”, said Olson.

discipline — Discipline part of a company’s reverse stock split

Olson spoke about the reverse stock split “thereby increasing the number of shares of common stock available for issuance. We believe it is likely to increase the market price as fewer shares will be outstanding.”

He also noted that “the expected increased market price will encourage interest in the common stock.”

Grow Capital is another company hoping to increase its share price by reducing available shares to investors.

Xerox has reverse stock split

In addition to small companies like Grow Capital, established corporations like Xerox(NYSE:XRX) had a reverse stock split in 2017. Xerox spoke about the 1-for-4 stock split in a statement.

“As a result of the reverse stock split, every four shares of Xerox common stock issued and outstanding or held as treasury shares were automatically combined and reclassified into one share of Xerox common stock. The reverse stock split also affected all outstanding Xerox equity awards and outstanding convertible securities,” said Xerox.

What did financial experts say about Xerox’s stock split?

When Xerox announced its reverse stock split, Ian Wyatt, editor of High Yield Wealth, spoke about the decision.

“So why did Xerox bother with a reverse stock split if investor wealth remains unchanged? Visibility is the answer. Many institutional investors—mutual funds in particular—ignore stocks priced in single digits. Many investment firms ignore these stocks as well. Xerox is trying to raise its profile with its reverse-stock split,” said Wyatt.

Wyatt noted that he and other experts were unsure if the decision would impact Xerox stock.

“We’re agnostic on the reverse stock split. It could raise Xerox’s standing among institutional investors and research analysts. It could also lower Xerox’s standing among other investors. Some investors are repelled by reverse stock split. They view a reverse stock split as an insincere strategy for raising the share price. Financial performance ultimately determines value and price in the long run.”

Xerox revenue falls during COVID-19

While Xerox stock rebounded after the stock split initially, shares tumbled during the coronavirus crisis. The corporation’s Q2 2020 revenue fell to $1.465 billion from $2.263 billion.

“The global COVID-19 pandemic crisis significantly impacted our second quarter 2020 revenues due to business closures and office building capacity restrictions that impacted our customers’ purchasing decisions and caused lower printing volumes on our devices,” said Xerox in a statement.

Xerox is still a viable company after its stock split, but has suffered like man companies in this current economy.

AIG rebounds after reverse stock split

AIG( NYSE:AIG) stock rebounded after collapsing during the 2008 financial crisis. The insurance company tried to recover by having a 1-for-20 reverse stock split.

Cathy Seifert is an insurance analyst with Standard & Poor’s Equity Research. She noted that AIG’s stock split was more about easing investors’ worries than about its bottom line.

“Market psychology probably has something to do with this. The underlying fundamentals haven’t changed but the mechanics have,” said Seifert.

AIG another victim of COVID-19 crisis

Just as with Xerox, AIG’s revenue dropped during the coronavirus crisis.

AIG spoke about the results in a statement.

“Overall, AIG reported adjusted pre-tax income of $803 million and adjusted after-tax income of $571 million or $0.66 per diluted share, compared to $1 — compared to $1.3 billion or $1.43 per share in the second quarter of 2019. The key drivers of the year-over-year reduction were higher catastrophe losses from COVID and civil unrest, along with lower net investment income,” said AIG.

While AIG persevered after 2009, the company’s still struggling during the current volatile economy.

E-trade thrives after reverse stock split

E-Trade( NASDAQ:ETFC) approved a 1-for-10 reverse stock split in 2010. Since then, Etrade stock soared as the trading firm added customers during the COVID-19-caused shutdown. E-Trade’s CEO, Chad Turner, spoke about the company’s positive results.

“We delivered strong financial results on top of continued record-setting operating metrics,” said Chad Turner, Chief Financial Officer. “We generated our highest period ever of revenue from trading-related activity, which more than offset the quarter-over-quarter pressure on net interest income, given the Fed’s recent rate cuts to near zero.

“While we remain prudent on managing expenses as we navigate this low interest rate environment, we continue to opportunistically invest in sales and marketing to maintain the tremendous momentum in growth of accounts, assets, and deposits amid an environment that is particularly ripe for franchise growth,” said Turner.

Turner also spoke about how the increase in traders caused a growth in assets.

“Furthermore, the blistering pace of account and asset growth continued in the second quarter, with $13.6 billion in net new retail assets, and 327,000 net new retail accounts, bringing our year-to-date retail asset flows to $31.9 billion and account growth to 656,000,” added Turner.

E-Trade stock soared after its successful reverse stock split.

Motorola struggles after reverse stock split

Motorola( NYSE:MSI) had a 1-for-7 reverse stock split in 2010 before split into two corporations: Motorola Solutions and Motorola Mobility. The company spoke about the split in a statement.

“Today’s announcement marks another important milestone toward the upcoming separation that is expected to benefit Motorola, its stockholders, as well as each company’s respective customers and employees. We look forward to taking advantage of the opportunities before us as we begin the new year as two independent, publicly traded companies,” said Motorola.

Motorola suffers during global pandemic

Even though the split helped the company after the decline of its Razr phones, the COVID-19 crisis hurt Motorola as well. In its latest Q2 2020 report, the company spoke about its worse-than-expected earnings.

“Q2 results included revenue of $1.6 billion, down 13% from a year ago, including $40 million of revenue from acquisitions and $30 million of currency headwinds. GAAP operating earnings of $218 million and operating margins of 13.5% compared to 18.8% in the year-ago quarter,” said Motorola in a statement.

Despite its reverse stock split, Motorola’s stock stumbled during the COVID-19 crisis.

AT&T profits rise after reverse stock split

AT&T (NYSE:T) stock remained stable after its reverse stock split in 2002. In that split, the corporation had a massive 24,875 for 50,000 stock split.

AT&T stock rose after a reverse stock split

Since that stock split, AT&T stock rose and still had a positive Q2 2020 earnings report. CEO John Stankey spoke about the results.

“Our core subscription businesses proved to be resilient in the face of the economic downturn. Our mobility and business wire line segments performed well, and we grew EBITDA[ earnings before interest, taxation, depreciation, and amortization] margins in both areas. EBITDA of $7.8 billion was up year-over-year with both EBITDA margins and service margins expanding, and that’s inclusive of COVID impacts,” said Stankey.

He added that AT&T’s cash flow grew despite the pandemic.

“Cash flow was impressive even during the pandemic. Cash from operations came in at more than $12 billion and free cash flow came in at $7.6 billion,” said Stankey.

Stankey also noted that the quarantine helped AT&T’s cable and HBO Max streaming service grow as well.

“Our software-based entertainment businesses performed well. ATT TV subscriber growth in its first full quarter was better than we expected and it’s our highest performing video product with customer satisfaction, double the level of our legacy TV services,” added Stankey.

AT&T stock and business division rebounded and increased after its reverse stock split almost 20 years ago.

Citigroup

Citigroup (NYSE:C) had a 10-for-1 reverse stock split in 2013. During the split, some shareholders disapproved of the split. One shareholder commented on the split at the time.

“You guys know what the price of the stock is. It is the same price when we did the reverse split. This stock has to reach $600 for me to break even. Bring it down to $4.65 and then maybe it can climb back up to $60,” said the shareholder.

CEO Michael Corbat spoke about the stockholders’ concerns.

“This reverse stock split wasn’t done to engineer the stock price. It was done to reduce volatility and to get shareholders out of the stock who were using it as a trading vehicle, ” said Corbat.

Citigroup has better-than-expected earnings after reverse stock split

Despite the coronavirus crisis, Citigroup exceeded Wall Street expectations. Corbat spoke about the Q2 2020 results.

“While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well. The Institutional Clients Group had an exceptional quarter, marked by an increase in Fixed Income of 68%. Global Consumer Banking revenues were down as spending slowed significantly due to the pandemic,” said Corbat.

“We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 [common equity tier one capital] ratio improved to 11.5%, comfortably above our new regulatory minimum of 10%. We continued to add to our substantial levels of liquidity and our balance sheet has plenty of capacity to serve our clients,” added Corbat.

Corbat also spoke about how Citigroup was prepared for more volatility in the future.

“With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation,” said Corbat.

Citigroup stock flourished after its reverse stock split and help from the Federal Reserve.

Aurora Cannabis latest company to have reverse stock split

In a more current example of a stock split, Aurora Cannabis (NYSE:ACB) is implementing a 1-for-12 reverse stock split. The corporation will reduce its available shares to investors from 1.3 billion to roughly 110 million.

Despite the boom in pot sales during the worldwide quarantine, the marijuana company’s shares have plummeted. Aurora explained its decision in a statement.

Aurora Cannabis stock hope to rise after a reverse stock split — Aurora Cannabis stock hopes to rise after a reverse stock split

“The company intends to use a portion of this available capacity to provide further balance sheet strength and preserve flexibility given macroeconomic uncertainty caused by COVID-19,” said Aurora in a statement.

What do financial experts say about Aurora Cannabis’ reverse stock split?

In response to the announcement, Innovation Shares managing director Matt Markiewicz said that Aurora had no choice but to implement the reverse stock split. Aurora stock plunged to 69 cents a share. With that disappointing share price, the stock’s in danger of being delisted from the New York Stock Exchange (NYSE).

“They had to do this to stay compliant with NYSE rules. They can’t jeopardize the U.S. because of the large shareholder base here. There’s no way the company would risk cutting that conduit,” said Markiewicz.

Jefferies analyst Owen Bennett believes that the reverse stock split will hurt investors’ confidence in the cannabis company’s stock.

“Today’s announcement of a further [at-the-market program], alongside language that suggests [how] this will be used, will be a blow to sentiment,” wrote Bennett in a note to clients.

In contrast, Cowen analyst Vivien Azer notes that Aurora Cannabis’ positive cash flow can help its reverse stock split. However, she said that she had concerns about its overall balance sheet.

She noted that the cash flow is “a positive (particularly in the current environment), but we[Cowen] continue to have concerns on the balance sheet.”

Aurora has positive Q3 2020 earnings

Despite the concerns about Aurora’s reverse stock split, the company had a positive and negative Q3 2020 earnings report. While Aurora still hasn’t turned a profit, the company had an 18% increase in revenue to $78.4 million. CEO Michael Singer spoke about the corporation’s results.

“I am incredibly proud of the Aurora team for working through these challenging times in order to maintain uninterrupted operations at all of our production facilities and ensure we continue to meet the needs of our patients and consumers,” said Singer.

“I am also pleased that our third quarter 2020 financial results were in-line with our expectations, and that we remain firmly on track with the cost-savings and capex[capital expenditure] goals we detailed during our business transformation plan in February 2020,” added Singer.

“As outlined in our press release on Friday, revenue for Q1 2020 was $58.7 million with gross profit at $10.6 million. Both of these metrics are in line with the numbers previously estimated on the year-end call,” concluded Singer.

When Aurora Cannabis has a reverse stock split, it remains to be seen how it will impact investors.

Staffing 360 solutions has reverse stock split

Staffing 360 Solutions is another corporation that had a reverse stock split. The corporation’s stock will be sold in a 1-for-5 split. CEO Brendan Flood spoke about the shareholders’ decision in 2018.

“At a Special Meeting of Stockholders today, the stockholders of Staffing 360 Solutions voted by a large margin (over 74% of outstanding shares) to provide the Board with the authority to effect a reverse stock split at a ratio in the range of 1-for-2 to 1-for-10, such ratio to be determined by the Company’s Board of Directors. After careful consideration, the Board determined the appropriate reverse stock split to be a ratio of 1-for-5,” said Flood.

Staffing 360 Solutions Q1 2020 results mixed

After its reverse stock split, Staffing 360 Solutions had a mixed Q1 2020 revenue report.

While the corporation’s revenue was down, it was still in line with Wall Street expectations. Flood spoke about the Q1 2020 results.

As outlined in our press release on Friday, revenue for Q1 2020 was $58.7 million with gross profit at $10.6 million. Both of these metrics are in line with the numbers previously estimated on the year-end call.

Principal accounting officer Sharnika Viswakula spoke about the results as well.

“For the first quarter of 2020, revenue of $58.7 million reflects a decrease of 20.5% over the prior year of $73.8 million,” said Viswakula.

Staffing 360 Solutions has had mixed results since its reverse stock split.

Reverse stock splits affect investors in may different ways

In reverse stock splits, many corporations have been impacted in many ways. For investors, there are different results that can affect their ability to buy shares of a company’s stock and profit after the stock splits.

If investors want more information about reverse stock splits and how they affect their portfolios, they can practice trading on TradingSim. With research and simulated trades, investors can find the best stocks that can persevere after reverse stock splits.

Being a new investor can be daunting. However, if if you invest on your own, with an early investment, you can build a healthy portfolio. This TradingSim article will help guide investors that want to pick stocks on their own. This article will also have the top five stocks that investors can pick when they invest on their own.

Why are people hesitant to invest on their own?

In this volatile bear market and “corona-conomy”, you may be hesitant to invest on your own. If experienced financial planners can lose money on Wall Street, then many inexperienced investors may feel intimidated.

However, now may be the best time to invest on your own. With many stock prices falling, there is an opportunity to buy stocks at more affordable prices. You don’t have to be an experienced day trader to invest on your own. It can be beneficial to invest on your own.

Why should you invest on your own?

When people invest on their own, they can start with a small amount like $50. You can also put in larger amounts like $1,000. Financial planner Jeff Rose notes that investing on your own can pay off if you act early.

“Opportunity cost is that unseen payoff you miss out on because you’re busy doing something else,” said Rose.

401ks a great way to invest on your own

401k - Nest Egg

If you have a 401k retirement account, you’re already investing on your own. The retirement accounts put your money into are invested in stocks and ETFs that develop more income. The 401ks are tax-free as long as you don’t make early withdrawals.

Financial expert Jeff Rose also spoke about the importance of investing in 401k retirement accounts.

“You can think of it as the answer to the question, how much more would I be ahead if I chose a different path? In my own young life, the biggest opportunity cost — or financial mistake — was not opening a Roth IRA when I was 18 or 19 years old,” said Rose.

401ks are a great way to start investing on your own with an arranged list of stocks, ETFs, and mutual funds.

Direct stock plans are another option to invest in on your own

In addition to 401ks, direct stock plans are an option to invest on your own. Direct stock purchase plans allow investors to purchase stock directly from a company. Many major companies like Exxon Mobil offer direct stock plans.

ExxonMobil stock is good stock if you want to invest on your own

Investors can buy stocks once or on an automatic recurring basis through a transfer agent. The transfer agent buy or sell shares on a set basis on behalf of the company. The agent also tracks the records and transactions for the investor.

When investors invest a fixed amount every quarter or so, they are dollar-cost average investing stocks. When dollar-cost averaging, investors buy more shares when the price of a stock is low. Conversely, they buy fewer shares when a stock’s price rises.

Direct stock purchase plan fees vary according to the company. There may be initial setup account fees and automatic investment fees as well. In addition to those fees, you also have to pay fees when you sell stock shares as well. When investing on your own, you can directly buy shares of companies through stock purchase plans.

Dividend reinvestment plans another investment option

If you want to trade on your own, dividend reinvestment plans (DRIPs) are another investment option. When you invest in stocks that pay dividends through retirement plans, you can take the money from that payment and reinvest in the stock market. Once you sign an agreement with a company, you can reinvest the dividends to earn more money.

DRIPs can lead to compounding returns if you take dividends to reinvest them. If you keep reinvesting your dividends, you can increase your profits over the long-term instead of taking cash in the short-term. Some benefits are commission-free transactions and discounted stock share prices.

For example, if you buy Ford(NYSE:F) stock at $5 a share, you can get a dividend of $0.50. In this example, Ford’s stock will rise 10% and the dividend will rise $0.05% every year.

If you invest $20,000 when the stock price is $20, you can end up with 1,000 shares. At the end of the first year of investment, your dividend payout would be $500. If you reinvest that sum, after three years, you can increase your investment from $20,000 to $28,471.

Robo-advisors can help if you’re investing on your own

If you don’t want to use financial advisors but still want help picking stocks, you can still use robo-advisors to help with these plans. Robo-advisors are digital programs like Betterment and Wealthfront that help investors pick stocks. After you answer a questionnaire, the automated investment manager chooses stocks and ETFs that match your financial goals. They can also rebalance your portfolio

Investing on your own can be more affordable with robo-advisors. While human financial advisors can charge a 1% expense fee for trades, robo-advisors can charge less. Robo-advisor fees can be just 0.25%.

Robo-advisors can lower tax liabilities for investing on your own. Robo-advisors can help investors write off tax losses as well. Through tax-loss harvesting, you can sell a losing investment, general capital losses, and claim those losses to get a tax credit.

Rees Mason is a Merrill Lynch wealth advisor. She noted that robo-advisors can be combined with financial analysts’ advice to invest.

“The younger generation demands a higher level of value and want to understand exactly what they’re paying for. I don’t worry about robo-advisors because technology is used in tandem with human advice. Technology can make us more efficient and it’s great for people when they’re first getting started,” said Mason.

When investing on your own, robo-advisors can be a good guide.

What are the advantages of investing on your own?

While investing in a 401k is helpful, the stocks aren’t always your choice. If you invest on your own, you can have more control over your stock picks. You can also choose stocks that you are following closely. For example, if you’re a follower of Apple’s products, investing in Apple stock can be a good choice for investing on your own.

Apple stock can be a good stock for investing on your own

Investing on your own can help you save money. Stockbrokers and brokerage firms are very expensive. If you invest on your own, you can save thousands of dollars a year in brokerage fees.

In addition to saving you money, investing on your own gives you more hands-on financial knowledge. By studying a company’s quarterly revenue reports, balance sheets, and financial analysis blogs like TradingSim, you can get more information on how stocks are performing before you invest.

What are some disadvantages of investing on your own?

While investing on your own, there are downsides to investing on your own as well. Monitoring the stock market takes up hours of time and you may not have that much time to watch Wall Street.

In addition to not having time for active investing, investing on your own can lead to more emotional investing as well. Because you’re more heavily invested and not passively invested, you’re more likely to trade stocks more recklessly. Panic buying and selling based on Wall Street volatility can hurt your portfolio.

Financial planners can add objective advice if you need extra help and guidance. However, investing on your own can be beneficial if you have enough discipline and time.

What are your financial goals before investing on your own?

When you’re investing on your own, you have to consider your financial goals. If you want to purchase a home, you will have to be disciplined and invest a greater sum of money. However, if you want to just make short-term gains, you can invest a smaller amount of money.

Considering your financial goals are also pivotal if you want to make the most of your money. If you want to have money for retirement in the future or have a shorter-term goal, investing on your own is crucial if you want to meet your financial goals.

Tips to remember when you invest on your own

When you invest on your own, there are many precautions to take. Here are just a few things that you need to remember when you trade stocks by yourself.

Conduct a lot of research on stocks before you trade. When you start trading stocks, you must conduct a lot of research. By studying financial blogs, like TradingSim, investors can learn more about what stocks they want to trade.
Practice trading stocks before actual investment. Before investing on your own, you can practice trading stocks on TradingSim. With stock trading simulation, you can practice investing stocks before you put your real money on the line.
Focus on a few stocks you know. Once you research stocks and practice trading stocks on TradingSim, you can dive in and invest on your own in a few trusted stocks. You can start with low-risk value stocks like Coca-Cola (NYSE:KO) to start.
Know your financial limits. When you’re investing on your own, have a limit to how much you invest. If you have a set limit on how much you trade, it will help prevent you from suffering too many losses. In addition to losses, it’s important to have a set target for gains as well. Once you meet a certain target of gains for the trading day, you should stop at that amount once you reach that goal.
Create a trading journal. When you start investing on your own, you should keep track of your trades. Keep track of which trades were successful and which ones weren’t. You can use the information to adjust your trading strategy.
Seek advice from other traders and financial expert advice. Even if you don’t use professional traders, you should still keep in contact with other traders and other financial experts. Trading groups online can help you get more support as you trade. Reading the expertise of other financial analysts can also help you while you’re investing on your own.

Robinhood makes investing on your own easier

The Robinhood app has made it even easier to invest on your own. Noah Whinston, a Robinhood trader, said that the app makes trading more interesting.

“Robinhood feels very gamified. The act of trading stocks was boring for a really long time, and even today, if you do it through Charles Schwab, it would seem boring. Robinhood makes it feel frictionless and fun and easy, and it can be very, very addicting,” said Whinston.

Investing on your own can be advantageous if you have available funds to risk. The trading app has democratized trading and made it much easier to start trading stocks.

Tesla stock is a top stock for investing on your own

Dave Portnoy popularizes investing on your own

Barstool Sports founder Dave Portnoy has made day trading more popular with his flamboyant social media posts. He touts his success as a trader. Portnoy also says he’s a better investor than legendary investor Warren Buffett.

“I’m not saying I had a better career. … He’s one of the best ever to do it,” he said. “I’m the new breed. I’m the new generation. There’s nobody who can argue that Warren Buffett is better at the stock market than I am right now. I’m better than he is. That’s a fact,” said Portnoy.

Many traders say that with trading apps, they can find success. While investing on your own, you should proceed with caution.

Invest on your own with caution on Robinhood

While Portnoy and other traders say that investing on their own is a fun game, there are downsides to investing on the Robinhood app as well. Tyler Grant, a Robinhood user, says Portnoy has helped some new traders get into investments.

“His legacy is going to be the fact that he got people who realized they can get in the game and get in the game really cheaply,” said Grant.

However, Portnoy recently lost $220,000 on the E-Trade trading app. His rant about the loss on social media got him banned from the site.

“I’m down $220k now! Now I think I have to bankrupt E-Trade. I think I have a vendetta against E-Trade,” said Portnoy.

Robinhood not only option for investing on your own

Eric Balchunas, a financial expert, noted that low-cost index funds are a good option for investing on your own.

“The bigger, badder retail investor army is the $8 trillion sitting in low-cost index funds,” said Balchunas. “More and more people are seeing that the way to build wealth is by keeping costs low and being patient, not chasing hot stocks and investment fads.

Barclays analyst Ryan Preclaw said Robinhood’s returns aren’t as perfect as they seem.

“More Robinhood customers moving into a stock has corresponded to lower returns, rather than higher. “And while it’s true that many high-return stocks have had a substantial increase in retail ownership, low-return stocks have also had a big increase.”

Financial expert advises people investing on their own

While Portnoy and other day traders are touting their gains in the stock market, financial experts advise caution. Lauren Simmons, a former stock trader at the New York Stock Exchange, says investors should make sure they meet certain criteria before they invest on their own.

“It’s not just about investing in the market, but what is your wealth confidence overall? Do you have money in retirement? Do you have an emergency fund?” asked Simmons.

She also advises independent traders to ask more questions about their financial stability before they invest.

“Do you have savings? Credit card debt? Student loan debt? If you have any of the above, conversations about the stock market shouldn’t be coming out of your mouth. We are reaching historic highs again, and we are in a global pandemic,” said Simmons.

Low-risk trades in stocks are best options for investing on your own

Even though many day traders are discounting the expertise of expert investors like Warren Buffett, that may not be a wise choice. Eric Balchunas, a financial analyst with Bloomberg News, noted that low-risk investments may be best if you’re investing on your own.

“The bigger, badder retail investor army is the $8 trillion sitting in low-cost index funds. More and more people are seeing that the way to build wealth is by keeping costs low and being patient, not chasing hot stocks and investment fads,” said Balchunas.

Balchunas also wants traders to understand that they will learn about how to trade stocks from trial and error.

“And it’s very likely Robinhood’s day traders will arrive at the same conclusion at some point. Whether it ends in laughter or tears, it will be an education they can use for the rest of their lives,” said Balchunas.

When you’re investing on your own, conducting research, assessing your financial needs, and choosing low-risk options may be your best choice.

Top 5 stocks that you can choose on your own

These five stocks are a top choice if you want to invest on your own.

1.Microsoft

Microsoft(NASDAQ:MSFT) is a value stock that is a relatively stable choice for investing on your own. The established tech stock that has performed well during the COVID-19 crisis. Because of Microsoft’s cloud services, the corporation had a better-than-expected Q3 2020. Microsoft CEO Satya Nadalla spoke about the positive results.

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security – we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything,” said Nadella.

“Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead,” added Nadella.

Microsoft is a top stock for investing on your own

Amy Hood is chief financial officer at Microsoft. In a statement, she spoke about the positive revenue report.

“In this dynamic environment, our sales teams and partners executed a solid third quarter, with Commercial Cloud revenue-generating $13.3 billion, up 39% year over year,” said Hood.

“We remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth,” added Hood.

Microsoft Q4 earnings show continued strength

In its most recent Q4 2020 earnings report, Microsoft continued to have strong revenue. Nadella spoke about Microsoft’s Q4 2020 positive results.

“We delivered record results this fiscal year, powered by our commercial cloud which surpassed $50 billion in revenue for the first time, up 36% year over year. The last five months have made it very clear that digital tech intensity is key to business resilience,” said Nadella.

Financial analysts recommend Microsoft stock if you to invest on your own

If you’re investing on your own and want an expert analysis to help make a decision, many are bullish on Microsoft stock. Dan Ives from Wedbush praised Nadella’s decision to close Microsoft stores to focus on its cloud technology.

“This is a tough, but smart strategic decision for (CEO Satya) Nadella & Co. to make at this point. The physical stores generated negligible retail revenue for MSFT(Microsoft) and ultimately everything was moving more and more towards the digital channels over the last few years,” said Ives.

Microsoft stock is a top stock for people who invest on their own

“That said, in this COVID-19 environment this was the right time for Redmond to rip the band-aid off and close the stores strategically speaking,” added Ives.

If you’re investing on your own, it’s key to pick an established stock that advances with new tech. When investing on your own, traders can buy Microsoft stock.

2. Google

Google(NASDAQ: GOOG) parent Alphabet is another stock that is a solid choice if you’re investing on your own. The search engine giant has a well-performing stock. Google’s Q1 2020 revenue totaled $41 million. Google CEO Sundar Pichai noted that the tech giant’s stock is performing well because of its wide usage during the COVID-19 pandemic. In a statement, Pichai touted its growth in a statement.

Google is a top stock if you invest on your own

“Given the depth of the challenges so many are facing, it’s a huge privilege to be able to help at this time. People are relying on Google’s services more than ever, and we’ve marshaled our resources and product development in this urgent moment,” said Pichai.

Google’s ownership of YouTube also makes the stock a top stock if you want to invest on your own. Pichai noted that the video-sharing site added to Google’s profits.

“We are now adding roughly 3 million new users each day and have seen a 30-fold increase in usage since January. There are now over 100 million daily Meet meeting participants,” said Pichai.

Google a buy for financial experts for people investing on their own

With Google’s strong Q1 performance, many financial analysts see Google stock as a buy if you want to invest on your own.

Canaccord Genuity analyst Maria Ripps noted that Google stock is a buy because of its cloud computing growth.

“We see Google likely benefiting as the pandemic could be a tailwind for ad budgets shifting online, momentum in Google Cloud supporting consolidated growth, and Other Bets providing optionality for patient investors,” said Ripps.

In her note to clients, she also noted that Google is a buy because of its strong balance sheet.

“This, coupled with prudent expense management, a strong balance sheet, and share repurchases, gives us comfort around Alphabet’s ability to successfully withstand this near-term disruption,” wrote Ripps.

If you want to invest on your own, Google is a strong stock with impressive returns.

3. Apple

Apple (NASDAQ:AAPL) stock is another good choice if you want to invest on your own. The tech giant had a successful Q2 2020 with revenue of $58.3 billion. That’s a 1% increase from a year ago.

Apple’s CFO, Luca Maestri, noted that Apple’s robust device sales helped drive the company’s profits.

“Our active installed base of devices reached an all-time high in all of our geographic segments and all major product categories. We also generated operating cash flow of $13.3 billion during the quarter, up $2.2 billion over a year ago,” said Maestri.

Apple also had strong guidance for its future earnings.

“We are confident in our future and continue to make significant investments in all areas of our business to enrich our customers’ lives and support our long-term plans — including our five-year commitment to contribute $350 billion to the United States economy,” said Maestri.

Apple is a buy for financial analysts

Because of Apple’s strong Wearable device sales and positive guidance for Q3 2020, many financial experts day the stock is good pick if you’re investing on your own.

Apple stock a top stock if you’re investing on your own

Morgan Stanley lead analyst Katy Huberty thinks that Apple stock is a buy if you want to invest on your own. She wrote in a note to clients that Apple has diverse revenue streams beyond iPhones that will help drive the corporation’s growth.

“Investors are coming to realize that Apple may not be as dependent on significant iPhone cycles to sustain growth as they once thought, and that the ecosystem Apple has created is differentiated and worthy of a platform valuation multiple,” wrote Huberty.

Amana Mutual Funds agrees that Apple stock will continue to climb. The fund company notes even though iPhone sales are down, Apple’s successful Services division makes the stock a buy.

“Despite slowing iPhone sales, Apple’s services businesses have developed into meaningful contributors to revenue, with highly attractive margins,” wrote Amana Mutual Funds in a note to clients.

If you want to invest on your own, Apple is a stable stock that will offer steady returns.

4. Pfizer

Pharmaceutical stocks are great options if you want to invest on your own. The corporation’s stock surged after announcing a $2 billion deal with the government to produce a COVID-19 vaccine. Pfizer will deliver 100 million doses of the vaccine for free to patients if the vaccine is approved. Health and Human Services Secretary Alex Azar spoke about the Operation Warp Speed program.

“Through Operation Warp Speed, we are assembling a portfolio of vaccines to increase the odds that the American people will have at least one safe, effective vaccine as soon as the end of this year,” said Azar in a statement.

“Depending on success in clinical trials, today’s agreement will enable the delivery of approximately 100 million doses of vaccines being developed by Pfizer and BioNTech,” added Azar.

Pfizer has strong Q1 2020 earnings report

In addition to this deal, Pfizer profits increased in its last earnings report. Despite the coronavirus crisis, the corporation saw growth in its biopharmaceutical division.

“Our strong performance in the first quarter highlights the resiliency of our business even during the most challenging times. The Biopharma business grew 12% operationally, driven by strong performances from many key brands,” said Pfizer in a statement.

Pfizer had an optimistic outlook for the remainder of 2020. Chief financial officer Frank D’Amelio spoke about the guidance for the rest of the year.

“Despite the impact of COVID-19, 2020 is still expected to be a transformational year for Pfizer. Following the pending close of the Upjohn-Mylan transaction, New Pfizer will be positioned to deliver revenue and adjusted diluted EPS (earnings per share) growth that is expected to be among the industry leaders,” said D’Amelio.

“New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends,” added D’Amelio.

Pfizer a top stock if you’re investing on your own

Mizuho Securities analyst Vamil Divan rated Pfizer stock as a top choice if you want to invest on your own. Divan noted in a letter to clients that investors were hopeful about the potential Pfizer COVID-19 vaccine.

“We had several discussions with investors today on the back of the initial data, with much of the discussion focused on the commercial potential for a successful SARS-CoV-2 vaccine, ” wrote Divan.

“The company has mentioned that it will look to price a potential vaccine in line with other commercially-available vaccines, suggesting to us a potential blockbuster commercial opportunity, depending on the vaccine’s clinical profile and the ultimate competitive landscape,” added Divan.

If you want to invest on your own, Pfizer is a top choice for traders.

5. Netflix

When people were quarantined, Netflix views-and shares- rose. The streaming giant’s stock would be a good choice if you want to invest on your own. In its Q2 2020 earnings report, Netflix reported an increase in revenue to $6.15 billion. The company’s chief financial officer, Spence Neumann, spoke about the growth in Netflix subscribers during the worldwide shutdown.

“We have to look at it in the context of what just happened in Q2. And we just added 10 million members, which is the largest growth we’ve ever had in a second quarter,” said Neumann.

Neumann also noted that the growth in subscriber numbers comes from international members.

Netflix stock a good choice if you want to invest on your own

“So it’s very broad-based, and you can see that these members are coming in from everywhere in the world, a few million each in APAC[ Asian and Pacific American countries] and EMEA[ Europe, the Middle East, and Africa] and U.K. and then a couple of million in Lat Am[Latin America]”.

Financial analysts says Netflix a good choice if you invest on your own

With a mostly positive revenue report, Morgan Stanley’s Benjamin Swinburne says that Netflix should do well once it increases its production overseas for the company’s programming.

“Finally, with the majority of Netflix’s production occurring outside the U.S. combined with massive efforts to re-imagine production in a post-COVID world and selectively acquiring third party content, 2021 original deliveries should be higher than 2020 for the year and in each individual quarter,” wrote Swinburne in a note to clients.

Swinburne also wrote in a note to clients that the second half of 2020 will be good for Netflix with its high-profile available content.

“The first half of 2021 might face tough comparisons, but the second half should bring a stronger content slate than what will be seen this year, ” added Swinburne.

In addition to Morgan Stanley, Jefferies analyst Alex Giaimo also recommends Netflix stock if you want to invest on your own. In a note to clients, he touts the company’s subscriber growth.

“While the stock ran a bit faster than near-term fundamentals could support, let’s not lose sight of the fact that Netflix just added ~26 million subscribers in six months,” wrote Giaimo.

Giaimo also notes that Netflix’s subscriber growth may slow down when live sports returns. However, the company’s positive cash flow makes the the stock a good pick for investors.

“Subscriber growth will slow significantly in 2H20[the second half of 2020], but cash in the door now is better than cash in the door three months from now,” wrote Giaimo.

Because of Netflix’s increased viewership and cash flow, the streaming company’s stock is a top choice for investing on your own.

Investing on your own can be done with research and patience

If you’re investing on your own, you can overcome your fears and doubts to perform well in the stock market. You can simulate trades on TradingSim to perfect your strategy or read TradingSim blogs to get investing insight. With patience, research, and maybe even help from other investors, you can find the best stocks for you.

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