Meme stocks overtook the market in early 2021, with investors piling into companies gaining buzz on Reddit and other online forums in an effort to make money and outsmart hedge fund investors.
Outside of the internet buzz, these stocks were tempting to investors for several reasons. Their prices were low, market participants had extra capital to invest from stimulus checks, and investors recognized familiar names such as GameStop Corp. (ticker: GME) and AMC Entertainment Holdings Inc. (AMC).
Additionally, the internet and social media played an important role in driving attention to these speculative names and bringing the meme movement to the retail audience.
“Social media has made the accessibility and spread of (meme stocks) happen so much faster across geographic boundaries where people, who especially aren’t in finance and investing, get pulled in because of the story itself,” says Daniel Egan, director of behavioral finance at Betterment, an investing and saving app.
As a result, there are more novice investors participating in the markets to see if they can make a quick profit. And the emergence of those new investors can have far-reaching implications for investing as a whole.