They were queuing up to open an investment account at the start of the corona crisis in March 2020. In the meantime, it is clear that there were ‘gold diggers’ among them, who saw a great opportunity for a quick profit in the panic on the stock market, and serious ‘ corona beginners’, who were looking for an alternative to their savings.
Apart from that distinction: the Netherlands has never had so many investors before. Over the past two years, the number of households that invest has increased by about a quarter to 1.9 million. About 5.2 billion euros of new money flowed to the stock exchange, as a result of which Dutch households together held 185.4 billion euros in investments at the end of 2021.
As mentioned, the beginning of the corona crisis was a starting point for many. While prices fell sharply – the AEX index lost more than 30 percent in a month – providers of investment services saw a large influx of new customers. Online broker DeGiro had to put tens of thousands of people on a waiting list that spring.
The great enthusiasm of those new investors does not mean that they all entered the stock market with large capitals. This is shown by an annual survey by the Netherlands Authority for the Financial Markets (AFM). This shows that two-thirds of beginners have invested less than €5,000 in the past two years, and only 13 percent have invested more than €25,000. For experienced investors, the proportions are just the opposite. 44 percent of them have more than 25 grand in investment accounts.
on the seesaw
Investor trainer Peter Siks of Saxo Bank, which owns BinckBank, thinks that some of the corona investors went for the one-off profit. “You can say that these are a bit of gold diggers. Those people just thought: this relapse is exaggerated, I’m willing to bet a few thousand euros now. They really just wanted to take advantage of the decline. And afterwards they were right.”
According to Siks, a second category saw the stock market fall in March 2020 as an opportunity to do more with savings on a structural basis. “These are people who have been dreading the low interest rate for a while. They sat on the seesaw and thought: I now get a 20 to 25 percent discount, now I’m going to do it. “I did not expect that. Normally people wait until the stock market has calmed down, until the panic has subsided and the way up has been found. There was already an influx of new accounts during the decline.”
It is difficult to say exactly how many both types of investors are. When asked, various providers of investment services stated that they were unable to provide figures on this. Online broker Lynx does confirm that the corona crisis was the signal for a significant group to start investing actively.
Lynx, which focuses specifically on this target group, saw a significant influx as the corona crisis progressed, says a spokesperson. “Many brokers targeting the novice investor have welcomed a huge group of new investors. Part of that group still flows through to us.”
Ennobled gambling
The big question is whether all those beginners will remain active when the tide turns on the stock market. A period of declining prices that lasts longer than the corona crisis cannot be ruled out. In the past, such a thing was a reason for many people to give up. For example, from early 2007 to early 2010, the years of the financial crisis, 145,000 Dutch households stopped investing – more than 8 percent.
Siks doesn’t see that happening so soon. “For many older Dutch people, investing is a glorified form of gambling. Many young people, on the other hand, see it as part of their financial management, not as something you will try for a year.”
New investor Huub Rademakers (62) invested 10,000 euros at the start of the corona crisis. The stock market had already risen sharply before, and he wondered whether he would still ‘get in’. “When the stock market sank, I took action. I was just ahead of the big stream of new investors.”
His investments – equities combined with options – have yielded him about 16 percent return in two years. Nevertheless, Rademakers sees the first two years mainly as a learning experience. He has taken courses on investing – hence the use of options, which is a bridge too far for most beginners. “As a beginner, this was more than enough for me. I won’t put in more money until I manage it better. You can certainly not oversee everything in the beginning. You have to focus on it, and then expand step by step.”
Rob de Groot (62) had already gained experience years earlier. After the internet bubble burst at the turn of the century, he was “one of the many disappointed ones.” At the beginning of 2020, he saw an opportunity in the corona crisis in China. “I was aware that after such a dip, a very quick recovery follows. I had also seen that after 2000.”
The first results were good. He made about 50 percent profit on 25,000 euros and decided to invest another 35,000 euros in the autumn. “After that, I had some serious blows with risky growth stocks. So my entire profit went up and turned into a loss.”
Still, he has no intention of stopping again. “I got off to a good start and gained the experience that it can go up very quickly, but also very hard down. I lacked knowledge. Now I can persevere because I am serious about learning more. Otherwise I might be just as disappointed now as I was after that bubble in 2000.”
Dennis (37), who only wants to talk on condition of anonymity, seized the fall on the stock market in March 2020 and invested about 1,000 euros in index funds. This has grown to 1,400 euros. “It seemed like a good time to start, but I didn’t dare to invest a large amount like 10,000 euros right away. And then we bought a new house and all the money went to the renovation.”
So it has remained with that one-time investment. Dennis did consider investing again at the start of the war in Ukraine a month and a half ago. But he chose certainty. “We pay off much more than we invest.”
A version of this article also appeared in NRC in the morning of April 14, 2022