What Are Meme Stocks, and Are They Real Investments?

He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. To invest in an index fund, you 5 minute forex scalping strategy need to open a brokerage account, a traditional IRA or a Roth IRA. You can often choose to invest in index funds via your employer-sponsored 401(k), too.

When someone shorts a stock, they’re betting the stock price will go down between the time they sell and repurchase the stock. Single stock ETFs have also recently been introduced, which provide leveraged long or short positions on a single https://www.topforexnews.org/news/why-is-the-consumer-price-index-controversial/ stock. Only a small number of these have been approved for trading so far, but do include some meme stocks like Tesla and NVIDIA. Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price.

  1. A meme stock is a stock that has gone viral online, drawing the attention of retail investors.
  2. Meme stocks refer to a select few stocks that gain sudden popularity on the internet and lead to sky-high prices and unusually high trading volume.
  3. Meme stocks have also caused traders to be more aware of what sources they use for investment research.
  4. When a rising stock price starts to pressure Short Sellers into closing their Short positions, this creates what’s known as a short squeeze.
  5. The investing information provided on this page is for educational purposes only.

They allow people to rapidly spread humorous, interesting, or sarcastic videos, images, or posts to others around the world. The rapid and multiplicative effect of sharing such posts could make them go viral. Meme stocks can be attractive simply because there’s room for money to be made if a stock goes viral. But they aren’t necessarily a sustainable bet for a portfolio, especially for investors who may lean toward more conservative investments.

Below are the five best-performing stocks in the Solactive Roundhill Meme Stock Index, ordered by one-year returns. WallStreetBets users quickly identified other downtrodden stocks with heavy short interest to boost. These included AMC Entertainment Holdings Inc. (AMC), the movie theater chain that saw flagging profits amid the COVID-19 pandemic, and Blackberry Limited (BB), the outmoded smartphone maker. After all is said and done, investors who have sold Short, and then closed their Short position, have hopefully earned a profit from a declining share price.

In this and other forums that have popped up since, users work together to identify target stocks and then promote them, while also putting their own money to work. If you’re an active day trader, you can also look at technical indicators as well. Technical indicators can help you gauge how a stock is trending currently and where it may be headed next, based on overall market conditions. For technical indicators, you’re focusing on these like moving averages or Bollinger bands to track trends.

To date, dozens of class-action lawsuits have been filed against Robinhood, and the U.S. House Committee on Financial Services and the Justice Department have both taken a close look at Robinhood’s behavior. So if you sell the stock you borrowed for $10, and then its price rises to $50, you’re responsible for those shares, meaning you’re on the hook for that $40 you owe the broker. The investing information provided on this page is for educational purposes only.

Then, in January 2021, the short squeeze that The Roaring Kitty had suggested took place in earnest, with the price of GME shares exploding to nearly $500 amid a frenzy of short-covering and panic buying. Meme stocks, however, didn’t truly emerge until the year 2020 via the Reddit forum r/wallstreetbets. Unlike its predecessors and other investing message boards, WallStreetBets became known for its unconventional and often irreverent tone.

Meme Stocks: What They Are and 5 Top Stocks for March 2024

Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Meme stocks often happened to be hard to borrow, with a high short-interest ratio. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns.

A Meme Stock Glossary

Also on Jan. 26, Tesla CEO Elon Musk tweeted a link to the WallStreetBets subreddit where talk of GME was the main topic of conversation, with the caption, “Gamestonk!! ” Often in the case of recent meme stocks, the cycle has been fueled by praise and mentions from public figures. Both companies also allow investor to buy fractional shares of stocks, so you can buy a piece of the action without getting in too deep.

Can I make money with meme stocks?

That seller must borrow shares from somebody who is long the stock in order to sell them. As more and more shares are sold short in this way, there are fewer shares left available to borrow. Once a stock becomes hard to borrow, even the most motivated short seller may be unable to do so. Indeed, as these became recognized meme stocks, members of r/wallstreetbets and similar outlets began to acknowledge the https://www.day-trading.info/best-stocks-to-buy-and-watch-now-2020/ humor (for the “lulz”) of seeing such legacy companies emerge from the ashes in the stock market. 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.

It is not as extreme an example as GameStop, but given the  high-profile presence of CEO Elon Musk, it remains a company whose shares that can rise and fall based on online chatter. A “meme” is a term referring to a tidbit of culture — photographs, videos, phrases — that spread rapidly online through social sharing. Once your account is open and funded, you can also choose from a number of different index funds, like an S&P 500 fund, a fund that tracks government bonds or a fund that tracks international stocks. Funds that track the S&P 500 are generally an effective way to earn a good return on your money over time.

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