Treating Stocks with Caution

Treating+Stocks+with+Caution

Linda Qiu, Staff Writer

In recent weeks the Redditor stock market rebellion has been at the forefront of the news as well as many people’s minds. 

What started as a half-joke, half-rebellion against hedge funds escalated to a landmark revolt against the professional investors of Wall Street. At a shallow glance, the story seems appealing; Reddit subreddit WallStreetBets has pioneered a story of humble retail investors taking advantage of the power of a coordinated buying campaign at the expense of wealthy investors and hedge funds. 

“It’s shocking, really amazing, and gratifying to see a little bit of the pain going on the side of the hedge funds,” said Jordan Belfort, a former stock broker whose story inspired the movie The Wolf of Wall Street. “The hedge funds have been beating up little investors since the beginning of time pretty much.” 

Unfortunately, the bubble must pop eventually. Artificially inflated stocks like the GameStop stock (GME) will inevitably plummet, and people will inevitably get hurt. Stocks like GME are incredibly volatile as they surge. The pace at which their prices skyrocket is a warning sign of a massive crash looming around the corner. When they do, the recoil harms investors who didn’t cash out at the right time.

“I’ve been looking at my phone nonstop for the past week, and it has worn me down,” said Reddit user Scott Smith. He had lost approximately $1,300 trading GameStop shares. “I’m going to take a long break and focus on my student loans before I think about stocks again.”

Netherland college student Evan Oosterink experienced even more severe losses. Encouraged by popular opinion on WallStreetBets and GME’s rising price, Oosterink invested over $10,000 of savings into GME shares. As the stock inevitably crumbled, he, like many of his fellow Redditors, experienced thousands of dollars in losses. Yet he still hasn’t lost hope in this bet.

“Being a part of WallStreetBets, it’s like a religion you’re devoted to,” Oosterink said. “There’s this enormous power driving WallStreetBets, this energy: ‘Hold the line. We aren’t giving in. We aren’t giving up. We are in for that ride to that moon.’ That is the power that keeps everyone holding their shares.”

Unfortunately, GME’s momentum seems to have completely fizzled out, making the mentality of Redditors like Oosterink seem a bit foolish. While GME will remain volatile for weeks to come, its peak has long come and gone. For the investors who still have money left in the market, it would definitely be better to cash in what they still have instead of clinging to a sinking ship.

 

Graphic courtesy of BUSINESSINSIDER.COM