Meme Stocks and the rise of Finfluencers
Did you know that 80% of 16-25 year olds are investors?
According to the Gen Z Investment Report, the majority of people in this generation are financially engaged and making some form of investment.
This surge in financial engagement is a testament to greater financial literacy as well as a reflection of a dynamic landscape shaped by social media.
The Rise of Finfluencers
Enter the era of ‘finfluencers’—financial influencers who are growing on platforms like TikTok, Instagram, and Reddit. These influencers are shaping the investment decisions of thousands through viral content and quick investment tips. A whopping 23% of Gen Z encounters financial and investment-related content while scrolling through their social media feeds.*
The rising popularity of NFTs, cryptocurrency and ‘meme stocks’ has been attributed to increased investment-related content on social media. As well as greater accessibility to low cost trading platforms, like Robinhood.
Let’s zoom in on meme stocks— disrupting the stock market status quo.
Meme stocks are shares that capture the internet’s attention, spreading like wildfire through online communities. These stocks often trade at premium valuations and are notorious for their volatility.
The rise of meme stocks can be traced back to 2020 when a Reddit community ignited the GameStop saga.
GameStop, considered the pioneer of meme stocks, saw its stock price surge dramatically, challenging traditional Wall Street norms. The frenzy exposed the power of collective retail investor action and significantly changed the landscape of online investing.
The Anatomy of Meme Stock Mania
Meme stocks typically go through four phases:
- Early Adopter: A small group of investors starts buying shares, causing the stock price to rise. Social media buzzes with discussions about potential gains.
- Middle Phase: Market observers take notice of the increased trading volume and rising stock price. More investors jump in to capitalise.
- FOMO (Fear of Missing Out): The FOMO stage sees a surge in investors eager to jump on the bandwagon, further driving up the stock price.
- Profit-Taking: As the early adopters cash in their profits, other investors, fearing losses, start selling. This triggers a decline in the stock price.
Unfortunately, those who join the party during the FOMO phase are often too late to take a share of the profits.
The Risks of Riding the Meme Stock Wave
While the allure of quick gains is undeniable, meme stocks come with significant risks.
Their value is often driven by social media hype rather than the fundamentals of the companies behind the stocks. The lack of regulation on social media means that not every piece of ‘advice’ is objective—some may be pushing investments for personal gain.
The Path to Smart Investing
The rise of Gen Z investors and the interest in meme stocks highlights a new era of financial engagement.
We passionately encourage this, but it’s crucial to approach investing with caution and education.
Your financial future is too important to be swayed by hype.
Be sceptical of overly optimistic promises and do thorough research. Stay informed, diversify wisely, and remember—if it seems too good to be true, it probably is.
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