Shares of video game retailer GameStop soared almost 75% on Monday following the return of « Roaring Kitty, » the social media finance influencer known for igniting the .
Shares of video game retailer GameStop GameStop soared almost 75% on Monday following the return of « Roaring Kitty, » the social media finance influencer known for igniting the 2021 meme stock frenzy, to X.com after a 3 year break.
If you were not around 3 years ago then and it seems a long time ago and you don’t know what a meme stock was, you missed out on some fun, but not really any real wealth creation unless you were lucky, in my humble opinion.
If you weren’t aware of the meme definition, it’s when a company’s stock price rises dramatically due to speculation on social media and online forums rather than any real evidence of solid financial health or solid business fundamentals, the stock is a meme stock. Individual investors, especially those who are active on social media sites like Reddit and X, frequently drive the interest in and popularity of these companies.Why Meme Stocks Are Attractive
As a fundamental investor, I concentrate on just that. The mechanics of the business and how it operates. Therefore, meme stocks don’t appeal to me so much. I like things I can understand and justify for an investment. I understand why things go right or wrong, for that matter, and if my numbers have been correct or not.
We live in an investing world that is lacking in patience for returns and particularly the more novice investors are on the lookout for very quick wins. We also live in a world today where illogical behavior can seem a bit smarter than logical behavior. With meme stocks, they have very high volatility, which means their prices change very quickly. Many investors trade these stocks because they’re afraid of missing out (FOMO), and they want to make quick money by riding the wave of interest created online instead of using more traditional investment methods that are based on how well the company is doing. These events can cause stock prices to rise sharply and then drop quickly, which makes investing in these names very dangerous.
Are you sure that you’re a smart investor? A lot of people think they are. Having said that, we are all sensitive beings. Because of how we think, we often make hasty, stupid choices that hurt our performance or cause us to lose. Surprisingly, most people make good financial choices. But timing, market movement, fear, and greed can ruin any chance of a good return. Often, it comes down to how people feel. Investors lose money not because of the economy but because of how they think and act. I talk a lot about investing as regards to human psychology here.
So put together the potential of some quick wins, some fancy social media dialogue, and a fear of missing out and you and your money could be parted very easily.
