Would you like to be up 34% in a stock… in just 30 minutes?
Of course you would.
Would you like to lose 20% of a share… in just 30 minutes?
Of course not.
Well that’s exactly what happened the last couple of days with the latest so called “same stock”.
Memes are most often pictures or videos that go viral, often expressing an idea. They can be inspiring. They can be funny. They can be downright mean.
Here’s one thing they can’t be… an investment.
That’s why Today’s MoneyWire is a critical public service announcement for you. Please read on before it’s too late …
The stock I mentioned is Clover Health Investments (NASDAQ:CLOV), one of the last meme stocks to trade insanely.
If you bought it yesterday at 3.30am and sold it at the open this morning, you are enjoying life after 30 minutes of very profitable trading.
But if you bought open and sold at 10:00 am, you’re not that happy… down 20% also in 30 minutes.
Same stock. Same amount of negotiation time. Very, very different result.
And this is where the problem with memes stocks lies.
A memes stock is stock that has gone viral on social media or a forum like Reddit. Buyers are pouring in. The price is skyrocketing. The volume goes through the roof. Short sellers are crushed.
And everyone ? Well, it’s basically the same as gambling and if you’re lucky enough to hit it at the right time.
In fact, it’s even worse than gambling – and that from a guy who likes to go to Vegas and gamble, and who likes to bet on sports. But here’s the difference …
I consider it entertainment. I am ready to lose money while I have fun. If I win, it’s a bonus.
It is do not invest.
I know there are some successful professional poker players, but they take thousands of hours to learn their trade and have systems that give them an edge. I would be extremely surprised if over 0.1% of investors buying these memes stocks spend thousands of hours reading stock charts.
And here’s the thing … If you had, you would never have bought Clover! What is happening is so crazy and so random that it does not fit any pattern.
Clover Health closed today at $ 16.92, down 23% after rising 86% yesterday. From there, it’s just as likely to go to $ 40 as it is to $ 10. You cannot make a rational decision on this basis.
I’m not criticizing the Reddit crowd that sets stocks apart and encourages people to buy them. I’m not defending Wall Street either. I am thinking of the average investor.
One of my biggest concerns is that people entering the market for the first time, especially younger ones, think this is normal. We know they are drawn to this viral investment. Brokerages are seeing an increase in new accounts. When these new investors get burned, as we know, I’m afraid they’ll give up stocks altogether.
It would be a tragedy because the stock market remains the best way for the average American to make money. I would absolutely hate to lose a generation of investors in what amounts to gambling.
I am all for “slaughtering the man” as much as anyone. I am as anti-Wall Street as anyone who invests professionally in stocks. I’m as anti-financial media as anyone who was in the financial media can be. But that’s not the way to stick with the man… not if more people will be injured more seriously than “the man” himself.
So my PSA to you today is: please don’t try to invest in actions even. If you want to have a little fun and invest some money that you are happy to lose, go for it. But this is not sustainable over time.
Meme stocks aren’t for your hard-earned money that you need to work for you – to pay for your retirement, your kids or grandchildren’s college education, your vacation home, etc.
Think about it too. You know very well that people who get action like Clover on Reddit and draw the crowds behind them also own stock. And when investors on the move have offered the stock higher and higher, there’s a good chance the people who started it all will cash in and look for the next opportunity. They basically create their own “pump and dump”.
Play if you want, but don’t confuse it with investing.
When it comes to your investments, you want to focus on the best companies working in the hypergrowth trends that are transforming our world and taking us all to a better future. Massive, unstoppable trends that will continue to happen for years to come.
Put your hard earned money to work in these kinds of actions is invest. It is based on research, analysis and probability. It is a calculated risk… and the calculation extremely favorable.
The convergence of innovative technologies like artificial intelligence, wireless 5G, precision medicine, the Internet of Things, driverless cars and blockchain are recreating the very framework of modern society.
The impact these technologies will have on the global economy will eclipse the Internet.
As of the publication date, Matthew McCall does not have (directly or indirectly) any position in any of the stocks mentioned in this article.
Matthew McCall left Wall Street to actually help investors – involving them in the world’s biggest and most revolutionary trends BEFORE everyone else. Click here to see what Matt has up his sleeve now.