Meme Stock Fallout, Part 2: The Downfall Continues, Lessons Still Unlearned

In part 1 of Meme Stock Fallout, we reiterated the importance of not getting caught up in the hype of severely overvalued stocks that have cult-like followings. The stocks we discussed in part 1 that were down an average of -82% from their peak (as of 5/2/22) are now down an average of -91% (4/17/24). One of those stocks (BBBY, Bed Bath and Beyond) even went bankrupt, with a few others now trading as penny stocks.

Unfortunately, DIY (Do It Yourself) investors have yet to learn their lesson, investing hard-earned money into the promise of a get-rich-quick scheme that rarely ever happens. The latest meme stock to take hold is DJT, which as of the time of this writing is down 64% from its peak from 3 weeks ago! This meme stock is particularly troubling: its current share price gives the company a $3 Billion valuation, despite the company losing -$58 million dollars in 2023, with annual revenues of a scant $4.1 Million. Despite all of that, there are more than 8 million shares being traded each day. The obvious political ramifications of DJT are only adding fuel to a fire that will eventually be smothered when the stock ends up trading at its actual book value.

Could a DIY investor make money on these types of stocks? Sure. But most DIY investors buy and sell at the wrong times and are also unaware of the various intricacies of day trading (margin calls, settlement periods, cap gains taxation, etc.). For every 1 success story, there are 99 failures.

The best course of action is to not get caught up in the hype. The only way to win the race is to exercise patience and restraint. Having an executable financial plan is your best bet and we’re here to help! Contact us for a free consultation.

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