Meme Stocks Explained
By Timothy Tibbettson 06/15/2023 |
Meme stocks are a phenomenon that began in late 2020, and it has gotten attention from Wall Street traders to Fortnite gamers making and breaking millionaires. What are meme stocks, and should you get involved?
The whole meme stock craze is a wild ride and nothing like buying traditional stocks. While standard investing requires research, monitoring, and usually slow and steady gains, meme stocks can turn you into a millionaire in weeks or months. It can also break you just as fast. Typically, you're not buying a stock with a proven track record, but instead buying a stock because other people are with the intent to get out with a profit. It takes timing, guts, and risk.
The initial popularity began with Reddit WallStreetBets, who mostly used RobinHood to buy and sell stocks. The most famous two stocks you probably heard of were GameStop and AMC. The interesting thing about both of these stocks is that very few investors would have bought either of these stocks. GameStop is a retail video game store that was possibly going under, and AMC is a movie theatre chain in trouble when no one could see movies during a pandemic. One could argue that meme stocks may have saved these companies.
We're going to use GameStop as our example.
If you were paying attention to WallStreetBets and bought GameStop in late 2020 at $15-$20, that stock hit a 1-year high of $325, and almost a year later, the stock is still worth $169. They also did a lot of damage to Hedge Funds, which had shorted the stock, costing them an estimated $20 billion in January of 2021 alone. While these investors got caught with their pants down, they haven't given up. Like many of us, they had to learn how to play this new game.
Had you purchased 50 shares of GameStock stock on January 10th for roughly $1,000, you could have sold it for $16,250 three weeks later.
Let's not forget about Cryptocurrency, which makes the stock market look tame. Investors will buy into a crypto stock just because Elon Musk tweeted a photo about it, amongst other reasons. Aside from the biggest players that most can't afford (Bitcoin), you can make a lot of money buying crypto for almost nothing. I know a now-retired multi-millionaire who did just that.
A recent (at the time of this article) example is Digital World Acquisition Group (DWAC). If you were paying attention, you could have bought it on a Thursday for about $67.96 and sold it Friday morning for $175.00. It might be interesting to see how much that stock is worth in a year or still listed on the NASDAQ or in business.
IMHO, the company profile of Digital World Acquisition Group often sums up what you're often investing in with meme stocks. Take note of the last sentence of the company profile.
Meme stocks are fun, wild, crazy, and volatile. They make the stock market fun. If you're considering playing in the meme stock game, be sure to read beyond WallStreetBets. There are also many Facebook groups, for example, that also monitor and pick stocks and crypto. Remember, if you play in crypto, it trades 24 hours a day, seven days a week, requiring a different level of monitoring.
That brings us back to the initial question - What are meme stocks, and should you get involved?
Just like the stock market, there is a risk. If you're interested and have the time, and more importantly, money you can lose, do what I did. Stick your toe in the water for a small amount and see how you do. Meme stocks are not going away, so you have plenty of time to start slowly and see if it's for you.
Good luck!
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The whole meme stock craze is a wild ride and nothing like buying traditional stocks. While standard investing requires research, monitoring, and usually slow and steady gains, meme stocks can turn you into a millionaire in weeks or months. It can also break you just as fast. Typically, you're not buying a stock with a proven track record, but instead buying a stock because other people are with the intent to get out with a profit. It takes timing, guts, and risk.
The initial popularity began with Reddit WallStreetBets, who mostly used RobinHood to buy and sell stocks. The most famous two stocks you probably heard of were GameStop and AMC. The interesting thing about both of these stocks is that very few investors would have bought either of these stocks. GameStop is a retail video game store that was possibly going under, and AMC is a movie theatre chain in trouble when no one could see movies during a pandemic. One could argue that meme stocks may have saved these companies.
We're going to use GameStop as our example.
If you were paying attention to WallStreetBets and bought GameStop in late 2020 at $15-$20, that stock hit a 1-year high of $325, and almost a year later, the stock is still worth $169. They also did a lot of damage to Hedge Funds, which had shorted the stock, costing them an estimated $20 billion in January of 2021 alone. While these investors got caught with their pants down, they haven't given up. Like many of us, they had to learn how to play this new game.
Had you purchased 50 shares of GameStock stock on January 10th for roughly $1,000, you could have sold it for $16,250 three weeks later.
Let's not forget about Cryptocurrency, which makes the stock market look tame. Investors will buy into a crypto stock just because Elon Musk tweeted a photo about it, amongst other reasons. Aside from the biggest players that most can't afford (Bitcoin), you can make a lot of money buying crypto for almost nothing. I know a now-retired multi-millionaire who did just that.
A recent (at the time of this article) example is Digital World Acquisition Group (DWAC). If you were paying attention, you could have bought it on a Thursday for about $67.96 and sold it Friday morning for $175.00. It might be interesting to see how much that stock is worth in a year or still listed on the NASDAQ or in business.
IMHO, the company profile of Digital World Acquisition Group often sums up what you're often investing in with meme stocks. Take note of the last sentence of the company profile.
Meme stocks are fun, wild, crazy, and volatile. They make the stock market fun. If you're considering playing in the meme stock game, be sure to read beyond WallStreetBets. There are also many Facebook groups, for example, that also monitor and pick stocks and crypto. Remember, if you play in crypto, it trades 24 hours a day, seven days a week, requiring a different level of monitoring.
That brings us back to the initial question - What are meme stocks, and should you get involved?
Just like the stock market, there is a risk. If you're interested and have the time, and more importantly, money you can lose, do what I did. Stick your toe in the water for a small amount and see how you do. Meme stocks are not going away, so you have plenty of time to start slowly and see if it's for you.
Good luck!
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