Why GameStop Stock Is Popular Again (and Why You Shouldn’t Trust the Hype)
If you thought the frenzy over GameStop and other so-called “meme stocks” was over after the roller coaster ride of 2021, think again: Shares of GameStop (ticker symbol GME) are up more than 500% in the past month alone, fueled by sharp price increases for GameStop shares (ticker GME). trading volume. But the so-called “meme stock” mania may have already waned this week.
This week’s roller coaster ride is reminiscent of the start of 2021, when members of Reddit’s investment community r/WallStreetBets banded together to buy shares of GameStop and other struggling companies like AMC. Their goal? To drive out hedge funds and other institutional investors who had been shorting these shares , betting their prices would fall.
While GameStop was the leader, other meme stocks like AMC Entertainment and Bed Bath & Beyond also saw big jumps in their stock prices in recent days as the Reddit crowd appears to be rallying its troops again.
So what does this mean for ordinary investors? A few key points:
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Meme stocks are extremely volatile and risky. Crazy investing is based more on internet sentiment than on company fundamentals. Prices can fluctuate wildly in either direction.
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Don’t invest money you can’t afford to lose. Given the unpredictable and speculative nature of meme stock trading, investors need to have a high risk tolerance.
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Understand what you’re getting into. While the prospect of early entry into the meme market is tempting, these are not normal market conditions. As in 2021, manipulation by coordinated online investment groups is suspected.
While the current rally in meme stocks (and their decline) may be interesting to watch, most investors will be better off watching from the sidelines. Those who do intervene must do so with their eyes open and aware of the extreme risks involved. Catching the next wave of meme stocks can pay off, but trying to ride these volatile market manias is not for the faint of heart. You’re safer putting your money in an index fund .