The tragic case of Alex Kearns, 20, a college student who killed himself in June last year after mistakenly believing he had lost a fortune to online trading app Robinhood, demonstrates the dangers of novice investors failing to understand the products they purchase, according to experts.
Kearns used the app to start trading options in his first year of college and a series of trades resulted in him seeing a negative balance of $730,000 in his account, which he thought he owed Robinhood.
His family is now suing the online broker, accusing it of allowing inexperienced investors to take big risks in complex financial instruments without providing investment guidance or the necessary customer support.
“Online trading platforms are not a risky proposition to gain access to markets. However, what worries me is investors’ behaviour and lack of financial literacy of the products they are trading,” says Ali El Adou, head of asset management at Daman Investments.
“High leverage and speculation are the most worrying factors. In 2015, trading platforms such as Alpari and many others filed for bankruptcy due to market volatility – a lesson investors should always keep at the back of their minds.”
The recent GameStop trading frenzy is another example of how trading apps offer big risks and rewards, and raises questions about how safe share-trading apps are for stock-market investors.
Robinhood has also drawn flak for restricting trading in GameStop shares and other heavily shorted companies, denying investors a chance to book profits. The platform said it limited trading in GameStop to boost its cash buffers and pay for clearing house deposits.
Akshay Nair, a UAE-based investment consultant who made a $65,000 profit in one week by trading in GameStop shares, agrees that a majority of customers using free trading apps are small retail investors who do not understand the risks.
“These platforms provide huge leverage, so people bet more than they can risk. They eventually make losses, especially in complicated products such as options,” he says.
Mr Nair says it is risky to engage in these trades without professional financial advice.
“The platform itself is not safe or unsafe. It depends on the investor’s knowledge,” he says.
Although he reinvested about $20,000 of his profit in another tranche of GameStop and AMC shares, buying 100 shares each for about $94, the stocks have continued to fall, and he now plans to book his losses. He says he has no regrets because he was willing to take a risk.
With retail investors increasingly seeking direct access to markets with the help of technology, online trading apps have become more popular. Demand surged during the pandemic due to monetary easing by the US Federal Reserve and other central banks, putting more money into people’s pockets during the Covid-19 lockdowns.
The best way to trade is to use several platforms belonging to different regulatory authorities rather than rely on a single one, no matter how advanced it may be, says Chaddy Kirbaj, vice director at Swissquote Bank Dubai. It is a safer option for investors to deal with fully regulated banks and brokers with reliable regulatory authorities, he says.
“The safety of online brokers depends on many factors, including regulations, business type, software integration, execution and the safety of clients’ money,” says Mr Kirbaj. “These apps are highly sophisticated tools that can be susceptible to technology failure, cyber attacks, hackers and disconnection.”
Traders also need to carefully read the agreement they signed with the share trading app as it “gives full legal rights to brokers to change the rules and trading conditions without any prior notice”, says Mr Kirbaj.
Karan Gurnani, a UAE-based trader in his mid-20s, says anyone looking to use an online broker must do a background check on its licence and the regulations it follows.
“A retail investor in the UAE has several options if they wish to gain access to global financial markets. For beginners, I recommend that you consult a seasoned financial adviser prior to making your investment decisions,” says Mr Gurnani, who has been investing in stock markets for a few years and manages money for more than 450 people through eToro.
He also recommends robo-adviser platform Sarwa for new investors to start easily with an investment account.
“Beginners must keep asking questions until they achieve clarity, no matter how irrelevant the question may seem. It is very important to know how and where your money is being invested and even more important to see returns on your investments, so be calculated and pragmatic in your approach,” he says.
These apps are highly sophisticated tools that can be susceptible to technology failure, cyber-attacks, hackers and disconnection
When following the do-it-yourself method, traders must consider several risks, especially if they are new to investing or not significantly knowledgeable about the assets they are trading in.
They must not commit a large portion of capital without diversifying, says Ramzi Khleif, general manager of wealth management platform StashAway Mena.
“For example, when an investor wants to get in on the hype of some stocks, such as GameStop, they tend to put in a large lump sum to drive higher returns, forgetting that they can also lose a lot if the stock falls.”
He says dollar-cost averaging – when an investor divides the total amount to be invested across periodic purchases of a target asset into a diversified portfolio – is a safe and effective way to invest “as it removes emotion from the decision of when to buy and helps maintain the strategy you set yourself to achieve your financial goal”.
Novice investors must also be careful when taking out leverage on these trading platforms.
“Buying on margin means you can double [or more] your exposure on a stock, but it also means increasing your expected losses,” says Mr Khleif.
“Investors also run the risk of facing a margin call [which can happen when the asset falls below a certain value] and would then need to commit even more cash to an already precarious position to avoid further losses.”
He says investors should avoid the hype of pursuing the “hot stock” of the moment but, rather, stick to a consistent investment strategy and contribute to a diversified portfolio that optimises returns for their specific situation.
Recommending alternative ways to invest for those who are not knowledgeable enough to use the DIY method, Mr Khleif says robo-advisers are a “good place for investors to begin their journey and optimise their risk-return profiles through an automated approach”.
These platforms offer exposure to several asset classes such as government bonds, commodities, US equities and emerging markets, and take the work out of optimising an investor’s portfolio based on market conditions and their specific risk profile, he says.
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On Instagram: @WithHopeUAE
Although social media can be harmful to our mental health, paradoxically, one of the antidotes comes with the many social-media accounts devoted to normalising mental-health struggles. With Hope UAE is one of them.
The group, which has about 3,600 followers, was started three years ago by five Emirati women to address the stigma surrounding the subject. Via Instagram, the group recently began featuring personal accounts by Emiratis. The posts are written under the hashtag #mymindmatters, along with a black-and-white photo of the subject holding the group’s signature red balloon.
“Depression is ugly,” says one of the users, Amani. “It paints everything around me and everything in me.”
Saaed, meanwhile, faces the daunting task of caring for four family members with psychological disorders. “I’ve had no support and no resources here to help me,” he says. “It has been, and still is, a one-man battle against the demons of fractured minds.”
In addition to With Hope UAE’s frank social-media presence, the group holds talks and workshops in Dubai. “Change takes time,” Reem Al Ali, vice chairman and a founding member of With Hope UAE, told The National earlier this year. “It won’t happen overnight, and it will take persistent and passionate people to bring about this change.”
What is Folia?
Prince Khaled bin Alwaleed bin Talal's new plant-based menu will launch at Four Seasons hotels in Dubai this November. A desire to cater to people looking for clean, healthy meals beyond green salad is what inspired Prince Khaled and American celebrity chef Matthew Kenney to create Folia. The word means "from the leaves" in Latin, and the exclusive menu offers fine plant-based cuisine across Four Seasons properties in Los Angeles, Bahrain and, soon, Dubai.
Kenney specialises in vegan cuisine and is the founder of Plant Food Wine and 20 other restaurants worldwide. "I’ve always appreciated Matthew’s work," says the Saudi royal. "He has a singular culinary talent and his approach to plant-based dining is prescient and unrivalled. I was a fan of his long before we established our professional relationship."
Folia first launched at The Four Seasons Hotel Los Angeles at Beverly Hills in July 2018. It is available at the poolside Cabana Restaurant and for in-room dining across the property, as well as in its private event space. The food is vibrant and colourful, full of fresh dishes such as the hearts of palm ceviche with California fruit, vegetables and edible flowers; green hearb tacos filled with roasted squash and king oyster barbacoa; and a savoury coconut cream pie with macadamia crust.
In March 2019, the Folia menu reached Gulf shores, as it was introduced at the Four Seasons Hotel Bahrain Bay, where it is served at the Bay View Lounge. Next, on Tuesday, November 1 – also known as World Vegan Day – it will come to the UAE, to the Four Seasons Resort Dubai at Jumeirah Beach and the Four Seasons DIFC, both properties Prince Khaled has spent "considerable time at and love".
There are also plans to take Folia to several more locations throughout the Middle East and Europe.
While health-conscious diners will be attracted to the concept, Prince Khaled is careful to stress Folia is "not meant for a specific subset of customers. It is meant for everyone who wants a culinary experience without the negative impact that eating out so often comes with."
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
I Care A Lot
Directed by: J Blakeson
Starring: Rosamund Pike, Peter Dinklage
3/5 stars
What is graphene?
Graphene is a single layer of carbon atoms arranged like honeycomb.
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were "playing about" with sticky tape and graphite - the material used as "lead" in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But as they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment had led to graphene being isolated for the very first time.
At the time, many believed it was impossible for such thin crystalline materials to be stable. But examined under a microscope, the material remained stable, and when tested was found to have incredible properties.
It is many times times stronger than steel, yet incredibly lightweight and flexible. It is electrically and thermally conductive but also transparent. The world's first 2D material, it is one million times thinner than the diameter of a single human hair.
But the 'sticky tape' method would not work on an industrial scale. Since then, scientists have been working on manufacturing graphene, to make use of its incredible properties.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. Their discovery meant physicists could study a new class of two-dimensional materials with unique properties.
'Avengers: Infinity War'
Dir: The Russo Brothers
Starring: Chris Evans, Chris Pratt, Tom Holland, Robert Downey Junior, Scarlett Johansson, Elizabeth Olsen
Four stars
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About RuPay
A homegrown card payment scheme launched by the National Payments Corporation of India and backed by the Reserve Bank of India, the country’s central bank
RuPay process payments between banks and merchants for purchases made with credit or debit cards
It has grown rapidly in India and competes with global payment network firms like MasterCard and Visa.
In India, it can be used at ATMs, for online payments and variations of the card can be used to pay for bus, metro charges, road toll payments
The name blends two words rupee and payment
Some advantages of the network include lower processing fees and transaction costs
