The Impact of Meme Stocks, How GameStop Changed the Game and Why Short-Term Spikes Aren’t Always Ideal

A lot happened in 2021, but one of the more notable was the GameStop share pump. The result of a Reddit board titled WallStreetBets, the pump saw an otherwise innocuous, so-called meme stock soar to a value beyond anything it had previously achieved. The aim way to disrupt those with short positions. The short squeeze started in January, and, by February, it was at a point where the price of GameStop shares was doubling in a single day. There are differing perspectives on the whole GameStop saga, but it certainly raised some interesting talking points.

The media coverage it received gave the general public a greater insight into the financial markets which, in turn, led to more interest in investing. It also reignited the debate about short-term and long-term investments. Both have their merits, but the unprecedented swings GameStop shares experienced helped to highlight the importance of investing wisely. It also showed that there is value in taking a long-term approach to the financial markets, instead of trying to make a quick buck.

Viral trend turns more people into investors

Leaving aside the economic, financial and political ramifications of the WallStreetBets saga, one thing to come out of the whole affair is an increased awareness in investments. Exact numbers are scarce, but the consensus is that more young people are now interested in the financial markets, thanks, in part, to the GameStop bull run. This revolution didn’t happen overnight. It’s been a work in progress for the best part of a decade. It all started with the emergence of online trading platforms.

The average person now has access to many financial markets via their computer or mobile. That wasn’t the case 20 years ago. As such, it could be argued that trading and investing wasn’t as accessible as it is now. Today, however, things are quite different. Anyone can use an online app to buy and sell stocks, ETFs, commodities and more. What’s more, the barriers to entry are lower than they used to be. New technologies help providers keep their costs low, which, in turn, makes the markets more accessible for all budgets.

This combination of access and viral interest contributed to GameStop’s shares reaching record levels. As was inevitable, the share price corrected itself and things returned to a state of normality fairly soon after the bull run. However, the impact of what happened is still being felt today. Time Magazine even profiled some of those caught up in the initial wave, such as Roman Tirone. He’d never been fully immersed in the stock markets but, after investing $10,000 in GameStop shares, he found a new calling.

Access and interest breathe new life into the financial sector

He quit his job running an app development company and began diversifying his portfolio. From traditional stocks, he moved into the NFT world and now makes most of his investments in the blockchain space. But not everyone had the same level of success as Tirone. In fact, many people lost money, and we shouldn’t dismiss this fact. This is where short vs. long-term investments comes into play. Media coverage of the GameStop saga may have exposed the masses to the financial markets, but it did little to explain the risks of meme stocks. Read more on Freetrade.io.

There was a brief discussion about the differences between short- and long-term investments. Both strategies have risks. However, investing in established companies or ETFs, such as the S&P 500, can be considered a safer long-term bet than a meme stock. That message got lost in the hype surrounding GameStop and its price rally. It may have been great for a few people over a short period of time. However, it didn’t work out so well for the majority. That’s something all investors, but particularly those that were new to the market, need to understand.

2021 will be remembered for many things, but there was at least one positive to come out of it. The financial markets were given a new lease of life thanks to a fresh batch of investors embracing new technology. Whether this will have a positive impact on the industry remains to be seen. However, for now, at least, the investment world is buoyant. And, as long as people can understand the risks involved with meme stocks and consider the potential upsides of a long-term investment strategy, some positives could come out of the GameStop saga.

This is a Contributed Article