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Nearly Half of Americans Say Volatile Markets Are an Easy Way to Make a Profit: AICPA Survey

NEW YORK–(BUSINESS WIRE)–So far this year, the U.S. stock market has been a financial roller
coaster that has continued into summer. It has not been unusual to see
the Dow swing in both directions by hundreds of points. At the
conclusion of the first quarter, the SP 500 had already seen 23 days
with one percent movements. That is nearly three
times the number of days this occurred in all of 2017. It appears
volatility has become the new norm. Surprisingly, even with that
significant increase in fluctuations, one-third of Americans (37%)
characterized the financial markets during the first few months of 2018
as stable, according to a telephone survey in April of 1,014 U.S. adults
conducted by The Harris Poll for the American Institute of CPAs (AICPA).

For many, increased market volatility may actually signal an
opportunity. According to the survey, nearly half of U.S. adults (48
percent) believe that a volatile market gives them an easy opportunity
to make a profit. Interestingly, both Millennials (aged 20-37) and Gen
Xers (aged 38-53) are much more likely than Boomers (aged 54-72) to
agree about the potential profitability of this short-term buying and
selling high-risk behavior (62 percent and 55 percent vs. 37 percent).
Experience in the markets appears to make a difference to more seasoned
investors. Many Millennials have only experienced a bull market as
adults and may not be as aware of the dangerous downturns that are a
natural part of the market cycle.

“Investing is not a get-rich-quick scheme and trying to time a volatile
market with hopes for huge gains is a serious financial risk,” said Greg
Anton, CPA, chairman of the AICPA’s National CPA Financial Literacy
Commission. “Many people who enter the market looking for a quick buck
find they can’t handle watching their investment lose value, which leads
them to sell at a loss. For most people, seeking incremental gains over
a longer time horizon is a safer, more sustainable approach.”

Cryptocurrency appears to be foreign to many investors. The survey found
that nearly half of U.S. adults (48 percent) are not familiar with
Bitcoin, Ethereum, or Litecoin. Of the 42 percent who are familiar with
cryptocurrency, there was wide speculation regarding how they would
perform in the next year. A quarter (24 percent) felt they would rise in
value, more than a quarter (29 percent) thought they would fall, over a
third (35 percent) believed they will fluctuate wildly, and 12 percent
said they will remain stable. Thus far in 2018, wild
fluctuations have lead the five largest cryptocurrencies to decline
in value substantially. Year-to-date, the global crypto market cap has
fallen from $598.5 billion to just $234.9 billion, meaning more than
$360 billion of cryptocurrency wealth has disappeared.

Investing Vs. Speculating

The risk associated with an investment opportunity is a crucial element
to help Americans differentiate between investing and speculating.
Investing is usually considered lower-risk and longer-term focused,
whereas speculation is high-risk and short-term focused. An investor’s
understanding of their own risk tolerance, the potential amount of money
they can endure losing, is essential when building a balanced portfolio.
The time over which an investment is expected to be held before it is
liquidated (time horizon), your net worth, income and the ease in which
an investment can be bought and sold (liquidity) all impact risk
tolerance.

In addition to knowing your own risk tolerance, investing involves
carefully researching business fundamentals such as quarterly financial
earnings, profit margins and market positioning to make sure the
opportunity fits your portfolio. Surprisingly, according to the survey,
three in ten Americans involved in household investment decisions (28
percent) say they never do research into investment strategies and
potential investment opportunities. And of those who do research, the
majority (63 percent) do it

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