Whether it’s from speaking to friends and family or browsing social media feeds, it’s easy to see that there is a renewed interest in the stock market among retail investors. At first glance, having more people interested in their personal finance and investing in financial markets seems like a very positive thing. However, after closer inspection, it’s apparent that a lot of this interest is based on speculation and get-rich-quick schemes. Some research indicates that a large driver of this trading volume originates from the same demographic that enjoys sports betting, and with no sports to bet on, gamblers have turned to financial markets to serve as their casino. Others have speculated that the new interest is driven by stimulus cheques and boredom from being stuck inside. Whatever the case, it’s causing some investors to take highly concentrated – and sometimes highly leveraged – bets, without fully understanding the risks. As Nick Maggiulli highlights, there will always be day traders and speculators that outperform even the most well thought out investment strategy as a result of sheer luck. This concentrated and levered type of investment strategy leads to higher volatility in which outcomes can vary widely but are skewed to the downside with very few resulting in large payouts. A recent blog series from Viewpoint Investment Partners digs into the effect of volatility on wealth outcomes and how to think about risk. At the end of the day, the probability of a day trader staying profitable over the long run is very low, so it’s important that long-term investors ignore the fear of missing out on headline-induced, short-term stock market fluctuations, in favour of a more prudent and diversified investment strategy.