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However, regular investing can produce lower returns if a share price is rising. In recent years, Nokia has pivoted from handsets to telecom infrastructure. When Covid-19 slowed the rollout of 5G, short-sellers flocked to Nokia. However, after releasing new shares in a bid to raise capital for restructuring, its price shot up to $5 per share on 25 January.
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More traditional investors decry the lack of business fundamentals and strong performance to justify sharp surges in stock price. On the other hand, as individual investors point out, given enough support from the masses, a climbing stock price (regardless of current fundamentals) can eventually equate to a stronger business. This comes from renewed consumer interest, along with a rebounding share price or the raising of fresh cash through capital markets when the stock price rises. One of the predicting factors of the meme stock revolution has been to raise the price of a stock through a short squeeze. Find stocks with highly shorted positions against them and buy those shares until short sellers are forced to close their positions. It is an interesting short-selling strategy, but as we have seen, it can work.
Risks of investing in meme stocks
NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Buying or selling a stock based on what you read on social media is risky.
Top meme stocks right now
Head to our Just Curious section to see what else we can answer for you. Just a day after the tweet from Musk, the stock rose to new heights once again. Then on Jan. 28, the stock reached a high of $483, before dropping to close the day at $193.60. This information is intended to be educational and is not tailored computer vision libraries to the investment needs of any specific investor. But the reemergence on May 12 of Roaring Kitty, who had been largely absent from social media and the public eye since 2021, appears to have revived this trade—to some extent.
Meme stocks refer to a select few stocks that gain sudden popularity on the internet alpari international review and lead to sky-high prices and unusually high trading volume. While some Reddit traders were able to make a lot of money in a short amount of time by buying and then selling AMC and/or GameStop at the exact right moment, investing in meme stocks is generally very risky. Meme stocks have been a boon to investors, day traders, and brokerage platforms but companies have also capitalized on the meme stock phenomenon.
- While it can be tempting to get in on a meme stock craze, your money is safer invested in other ways like through index funds.
- If your goal is to buy a house, save for retirement, or otherwise increase your financial security, you might consider a fundamentals-based investing strategy that isn’t guided by Reddit, TikTok, or any other media platform.
- These don’t apply to every example, but most will have at least some of these factors.
- Meme stocks are for thrill-seekers who oftentimes won’t profit from their investments in them.
STOCK TRADING SERVICE
Without their cult followings, meme stocks are not necessarily valuable assets. These online communities, such as the popular Reddit forum WallStreetBets, coordinate buying and selling efforts to influence stock prices. With enough online support, meme stocks can maintain elevated stock prices regardless of the underlying company’s worth. A meme stock refers to the shares of a company that have gained viral popularity due to heightened social sentiment. This social sentiment is usually due to activity online, particularly on social media platforms. These online communities can dedicate heavy research and resources toward a particular stock.
You could also consider the company’s price-earnings (P/E) ratio – the market price of a share divided by the company’s earnings per share. To do so, you’ll need to select a provider, choose the type of account you’d like to open and provide some personal details. Many of the most popular providers allow users to open and manage their account online or via an app. Tax treatment depends on one’s individual circumstances and may be subject to future change. The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of tax advice.
At the height of meme stock frenzy, Robinhood—the upstart brokerage that, a few years earlier, led the charge on zero-commission stock trading—and other major brokerages throttled trading of several major meme stocks. The financial institutions cited the need to meet financial requirements imposed by stock clearinghouses. Investors were outraged, sparking discussions about the fairness and transparency of the stock market. Investing in meme stocks may feel like a way to get something out of social media, but before you proceed any further, make sure you know the risks. Buying meme stocks isn’t investing; it’s trading, and it closely resembles gambling from multiple angles.
Meme stock price surge and retreat
In November 2020, it became public knowledge Cohen owned a 10% share in the company. By closing two days later, the value doubled; an 8x increase from the price at the time of Cohen’s and Gill’s previous posts. A meme is an idea or some element of popular culture that spreads and multiplies across people’s minds.
The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market review the misbehavior of markets analysis on Fool.com, personal finance education, top-rated podcasts, and non-profit The Motley Fool Foundation. At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every retirement article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investing products. A broker like Vanguard is a good choice for passive investors who want to hold funds long-term as it doesn’t offer many tools for those who are more active traders or interested in short-term trading. Expense ratios (basically the management costs) for its ETFs and mutual funds are some of the lowest around, with an average of 0.10%, meaning every $10,000 invested costs $10 annually. A few days later, the former CEO of Chewy.com and investor Ryan Cohen purchased an unknown amount of GME stock, which Gill acknowledged on Twitter (now X).
One of the features of meme stocks, especially early on, has been that they tend to be heavily shorted names. This means that there is a lot of short interest in the stock, or that a large proportion of the company’s outstanding shares have been sold short. Meme stock activity was given a great boost from bored individuals stuck at home during COVID-19 lockdowns combined with zero-commission brokerage apps like Robinhood. The Robinhood app saw overwhelming trading volume in meme stocks at times, causing multiple trade delays, outages, and platform crashes. This led to user outrage along with class action lawsuits as well as regulatory fines and restitution of approximately $70 million. After the initial meme stock craze, GameStop shares drifted steadily lower, settling at just over $10 a share by the Spring of 2024.
Hedge funds will likely be more careful with the stocks in which they build short positions. This means that the Reddit Rebellion was likely a once-in-a-lifetime opportunity. Shares of GameStop soared more than 110 percent in early trading Monday after Keith Gill, who goes by Roaring Kitty on social media sites X and YouTube, posted for the first time in three years.