What Are Meme Stocks, and Are They Real Investments?

With the ticker symbol MEME, the exchange-traded fund tracked the performance of stocks with elevated social media activity and high interest from short sellers. Part of the motivation behind the online support for certain meme stocks comes from hedge funds’ short positions in those companies. Retail investors are also likely to remain keen to pick up on the latest meme stock. Dominated by younger investors, meme stocks are still seen as a way Forex trading psychology to generate outsized returns in a short period, especially in the face of rising housing costs and inflation in general. But meme stocks also remain very volatile and risky, and retail investors are likely to be the ones to experience the most losses when it all comes crashing down. Roundhill Investments came out with a meme stock-focused ETF in December of 2021 under the ticker symbol ‘MEME’.

With the internet, chat rooms and discussion boards devoted to investing and promoting stocks also arose. In the late 1990s and early 2000s, these sites helped promote and drive up the prices of so-called dotcom stocks—a bubble that famously burst with far-reaching economic consequences. A meme is an idea or some element of popular culture that spreads and multiplies across people’s minds. Memes gained increasing prevalence and relevance as the internet and social media grew. 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 and Short Selling

However, simply writing off all meme stocks as too risky can be a mistake. For the right person, investing in the right meme stock for the right reasons can make a lot of sense. If you’re thinking about buying and selling meme stocks, keep in mind that you will probably have to pay taxes on your profits. Capital gains tax rates are especially high on stocks you held for less than a year. Risking money in speculative investments can be exhilarating, but it is rarely the path to long-term wealth. Investing in low-cost index funds and through tax-advantaged retirement accounts such as IRAs has a higher likelihood of success than relying on risky investing strategies.

That could mean the latest surge in stocks such GameStop and AMC could be shorter and reach less dramatic heights than in 2021. To search for trending meme stocks, be sure to visit MarketBeat’s Meme Stock list to compare companies based on figures like share price, short interest, social media engagement, market cap and volume. And remember that a meme stock is a short term trade, not a good investment for the long run. Meme stocks are shares that gain sudden popularity through social media, leading to a surge in their prices. These stocks are often driven by retail investors and can be highly volatile. Without a large retail investor following, meme stocks aren’t necessarily valuable assets.

Options Trading Strategies For Beginners

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.

How to buy meme stocks in the UK

You’re probably familiar with memes—bits of cultural info spread by imitation—but what about meme stocks? A meme stock is one whose share price is being driven by Internet culture. As a concept, they’ve only been around for a few years, but meme stocks have caused plenty of excitement—and, at times, pain—for active traders and everyday investors who get caught up in the frenzy. While not making any recommendations or indications about GME or any other stocks, these posts nevertheless reignited frenzied interest in meme stocks, causing a massive surge in trading volume and price. GameStop shares skyrocketed nearly 100% on Tuesday, May 14, 2024, following a 74% increase the previous day.

You’ll then be prompted to fund the account, which can usually be done via bank transfer, debit card or PayPal. BlackBerry, the Canadian brand behind the popular 2000s smartphone, has been struggling for over a decade, progressively losing market share to Apple’s iPhone. AMC is a US-based cinema chain that approached bankruptcy in January 2021, having been hit by the coronavirus pandemic. You should always check with the product provider to ensure that information provided is the most up to date. Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date. In its first-quarter earnings report last week, AMC disclosed a net loss of $163.5 million as the theater chain works to recover from the large amounts of debt it took on to stay afloat during the pandemic.

• However, they expressed doubt that the latest meme stock craze could reach 2021 levels in the days to come.
• MEME features an equal-weighted portfolio of 25 stocks based on social media popularity and market sentiment.
• Add in a pandemic, a surge in new investors who grew up online, and the ease of stock trading on new apps such as Robinhood Markets (HOOD 3.38%), and all the right ingredients came together to create a viral meme stock movement.
• Meme stocks, however, didn’t truly emerge until the year 2020 via the Reddit forum r/wallstreetbets.

These firms have been generally unloved by most mainstream investors, as reflected in their previously desultory share prices. Meme stocks are actual stocks listed on exchanges and available for trade. However, critics argue that their price performance and appeal have little to do with their fundamentals and much to do with their entertainment value as speculative playthings, much like casino games. Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price.

Positive sentiment can drive stock prices up, while negative sentiment can have the opposite effect. Online communities, like the Reddit forum WallStreetBets, coordinate efforts to influence stock prices. With enough support, meme stocks can maintain high prices regardless of the company’s actual worth. 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.

He currently researches and teaches economic sociology and the social studies of finance at the Hebrew limefx University in Jerusalem. I am the UK editor for Forbes Advisor with I am the editorial director, international, for Forbes Advisor. I have been writing about all aspects of household finance for over 30 years, aiming to provide information that will help readers make good choices with their money. The financial world can be complex and challenging, so I’m always striving to make it as accessible, manageable and rewarding as possible. I’ve been writing for a broad array of online publications for four years, always aiming to make important insights accessible.

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. Hedge funds are types of investments that pool money together from wealthy investors, and review mba asap 10 minutes to: understanding corporate finance short selling is when you borrow shares from a broker and immediately sell them with the hope that the stock price will fall. If it does, you can repurchase the shares at the lower price, return them to the brokerage and keep the difference as profit. Hedge funds and experienced investors know these aren’t long-term stock picks, they’re a wave meant to be ridden and abandoned when volume dries up.

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You can sell an investment by logging into your investing platform account, tapping the share you want to sell. Each investment platform has a slightly different process, but you’ll typically need to type the name of your chosen company – or its stock market ticker symbol – into a search bar. Investing in regular instalments allows investors to benefit from ‘pound cost averaging,’ an investing technique which helps investors pay less per share, on average, overtime in a falling market.