Every profession has its own set of warnings, and investing is no different. In addition to all the traditional pitfalls and dangers to be aware of, there’s a new political party in power in the U.S., which means no one can say for sure what kinds of new regulations and tax laws will be in place a few months from now. If you have money in the market right now, or are considering becoming a trader anytime soon, make note of the following four roadblocks.
New Regulations are Headed Your Way
If you buy and sell securities as a hobby or for a living, expect to see some new laws on the books very soon. Why? The new U.S. political administration may not be as investor-friendly as the last one was. This especially pertains to portfolio-building activities like day trading and precious metals investing. Laws in both those areas have been in a state of flux for several years anyway, but the next year should be the time for more detailed, restrictive policies on both fronts. You can’t really avoid this one, so just consider keeping an eye on the new laws and adapting accordingly.
Beware Social Trading
Recent doings in shares of GME and AMC are a lesson of what’s to come for those who use social media to gather information about which stocks to select. Once a free speech forum, the socials are no longer safe for serious investors. When the some of the largest platforms like TD Ameritrade recently restricted trading in GME and AMC for less than legitimate reasons, many everyday traders were incensed. Lawsuits are in the making, particularly the restraint of trade, so the fiasco is not over yet. What’s the lesson? Keep your options open and make sure your broker does not endorse questionable trading restrictions.
Cryptocurrency
National governments have been salivating to regulate the cryptocurrency markets. Their thirst for control is not restricted to coin-issuers but also to traders, investors, and consumers who use the new kind of money to pay for goods and services. Governments in general despise cryptocurrency because it usurps their power to control the flow of money. For example, both the U.S. and UK governments have been actively working on draft legislation to rein in the use, storage, ownership, acceptance, and issuing of crypto for at least five years. It’s only a matter of time before they start trying to track, trace, and otherwise surveil every iota of crypto that flows into your personal accounts. The solution is to use VPN’s, maintain encrypted storage of all your crypto funds, and be ready to cash it in if worse comes to worst.
Short-Selling
People often have difficulty with short-selling. If you want to take part in these kinds of transactions that let you bet on a downward turn in the price of a security, ask your broker what the rules are for your account. Some allow it and some don’t. In many cases, you need to have a certain amount of money in your trading account to do a short-sale. Or sometimes you just need prior approval. Every brokerage firm is different. If you run into a roadblock and really want to be able to short some stocks, consider switching brokers.