A Cautionary Tale About Meme Stocks

Did you get caught up in the meme stock chaos last week involving GameStop and AMC shares?

I sure did.

I put it down as an expensive lesson.

Gamestop was making lots of headlines just over a week ago and even made it onto the 6 o’clock news in the UK. Led by an army of amateur investors posting on a Reddit board, they had pushed the price of GameStop hugely and a lot of people were making a lot of money.

Not having been in at the start, I passed it off. I had, of course, missed the boat and would have left it at that.

But there were still a lot of people shouting about these stocks on Twitter. And apparently, the next big thing was going to be a stock called AMC.

So I thought, what the hell, I’ll buy a few shares and see what happens. And that’s where it should have ended.

But I got caught up in the general hubris. There was a lot of shouting about AMC stock ‘going to the moon’. And if it had emulated the GameStop performance from the week before then I would have made a really great profit.

But it only went up briefly last Monday before plunging to approximately half what I paid for it on Tuesday where it has bobbed around since.

It even plunged below $7.00 per share. Certainly up from where it was a month previously, but a lot less than the $13 per share I paid.

All in all I shifted around £400 from some of my other stocks into AMC. I ended up losing about £200.

Not a whole lot in the grand scheme of things, but enough to teach me a serious lesson in getting involved in schemes to make a quick buck.

And according to stories in the press, a lot more people lost a lot more money.

It was a real kick in the teeth for my investments. I had been using the trading app Trading 212 and had enjoyed good returns on my investments, gaining over 20% on my stock picks in less than 6 months.

But my more than modest returns were wiped out in a week when the AMC stock price came crashing down.

Aside from everything else, checking your phone every 2 minutes to see if you have lost or gained money is really not a very fun way to spend your afternoons.

There are a lot of people out there more than willing to pour petrol on top of a fire that is already raging. And you’re playing a very dangerous game if you let yourself get caught up in the excitement.

I would never tell anyone else what to do with their money, but a Warren Buffet quote I read last week stood out for me.

It reads ‘The stock market is a device for transferring money from the impatient to the patient.’

I don’t think anyone can go far wrong keeping that in mind.

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