Investors gamble away their money on the stock market
The Federal Financial Supervisory Authority (BaFin) wants to significantly restrict trading in so-called turbo certificates. The reason for this is a new investigation by the authority, which shows that the majority of small investors make losses with these high-risk products.
Turbo certificates are bets on rising or falling prices made by two trading partners. However, the broker who sells the certificate - similar to the bank in the casino - earns money on every deal.
The financial consequences seem dramatic: around 74% of investors suffered an average loss of over 6,000 euros when trading with this financial instrument within the last five years. Overall, the loss across all investors amounts to around 3.4 billion euros. This shows that the majority of investors underestimate the risks of these financial products.
In the Reddit channel r/Finanzen, in which events on the stock market are summarized, there was recently a discussion about the fact that leveraged certificates would have parallels to gambling:
Comment by u/the-eyes-never-lie from discussion in Finance
BaFin Executive Director Thorsten Pötzsch also told Handelsblatt that turbo certificates are “closer to gambling” than to long-term investment, as other experts from Switzerland claim to have recognized.
BaFin wants to curb gambling on the stock market
The BaFin report linked above shows how the financial regulator envisions the regulation of turbo certificates in the future:
- Clear risk warnings: Providers must clearly point out that around 70% of small investors with turbo certificates would suffer losses - from any type of advertising or sale.
- No lure offers: Bonuses or discounts that could motivate people to buy Turbo certificates, such as reduced order fees, gifts or preferred service, should be banned in the future.
- Mandatory knowledge test: Anyone who wants to trade Turbo certificates must first pass a knowledge test that shows that the basic functions are understood. The test should have to be carried out again every six months.
In addition to the turbo certificates, there are other reasons why inexperienced investors could be tempted to make risky investments. At the beginning of the year, the Austrian startup magazine Trending Topics advertised that (high-risk) investments in startups were a better alternative to gambling. In addition, the US President Donald Trump called for share trading on social media, after he had previously sent prices plummeting with his customs policy.
Not all stock market investments are gambling
In contrast to the controversial turbo certificates, investing in stocks and ETFs is intended for long-term wealth creation and therefore has few or no parallels to gambling. Market-wide ETFs such as the MSCI World or the FTSE All-World in particular spread the risk of total failure of individual stocks across thousands of companies worldwide.
Price fluctuations are still to be expected, but historically investing in the broad market has produced stable returns over long periods of time. However, if you try to find individual, particularly profitable stocks through targeted holding and selling, you are taking on a higher risk - without specialist knowledge, this can also become a game of chance.
Knowledge of how financial products on the stock market work could be a good barrier to entry to prevent investors from exposing their money to greater risks than they perceive. Knowledge tests could be used to put a stop to dangerous gambling with certificates without harassing experienced investors.
Similar posts
Gambling Bukmacherzy.com is restarting and revealing the balance of its betting tips Gambling online scratch cards in check: Why 90 AUDis enough here and 200 AUDis allowed elsewhere Gambling gambling update: Free spins at JackpotPiraten, New Year's Eve lotteries & ghost castle at SlotMagie Gambling Gambling Weekly Review: Halloween Slots, Betway Comes to Australia & Scandal in Online Poker
- Online casinos
- News
- Miscellaneous
- Bafin sees parallels between the stock market and gambling