Meme Stock Fallout

In our blog post from January 2021 (The Pitfalls of Concentrated Stock), we discussed the numerous downsides to holding any individual stock that represents more than 10% of your portfolio. By doing so, you’re exposing yourself to deep losses should the stock’s price experience a rapid decline. It’s safe to say that the heightened stock market volatility we’ve been experiencing in 2022 has led to big losses for DIY (Do It Yourself) investors.

Beginning in 2020 and peaking in early 2021, retail investors represented as much stock trading as all mutual funds and hedge funds combined*. This is a shocking statistic, especially when you peel back the layers to see what stocks many were trading. For example, “Meme Stocks” were (and still are) quite popular among DIY investors. While some have been able to profit by trading Meme Stocks, many have seen their account values dwindle. By evaluating 12 of the most popular Meme Stocks of the past 3 years, it’s not surprising to see that from their peak price through the date of this writing (5/2/22), these holdings are down an average of 81.73%! (BBBY, HOOD, GME, AMC, NIO, BABA, SPCE, TLRY, WKHS, PLTR, CLOV, NKLA, PTON). The range of loss is from -64.92% to -97.62%. There are many others we could have listed that experienced similar losses.

If you’re a DIY investor, the odds are pretty good that you’ve owned one or more of these stocks. If you still own them, you can understand the stress that comes along with it. However, not all is lost, and Position Wealth is here to help. If you have any questions about what you own, what to expect going forward, and how best to avoid these common trading mistakes, don’t hesitate to contact us for a free consultation.

*Katie Martin and Robin Wigglesworth, “Rise of the retail army: the amateur traders transforming markets,” Financial Times, March 9, 2021

Meme Stock: refers to the shares of a company that have gained a cult-like following online and through social media platforms. These online communities can go on to build hype around a stock through narratives and conversations elaborated in discussion threads on websites like Reddit and posts to followers on platforms like Twitter and Facebook.