This article explores the meaning of a meme stock, what causes it and what are its likely consequences for the investor. And while this iteration of the meme stock craze bdswiss forex broker review lasts, you may want to brace for more volatility among these stocks. For those still itching to trade the next viral stock, invest only with money you can afford to lose.

So a meme stock is a shared investing idea imitated by other investors. Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price. That seller must borrow shares from somebody who is long the stock in order to sell them. As more and more shares are sold short in this way, there are fewer shares left available to borrow.

Robinhood’s CEO said the restrictions were to help the brokerage meet increased regulatory deposit mandates. Short selling is when an investor—often an institutional investor like a hedge fund—borrows a stock and sells the shares with a plan to buy it back later to return. When someone shorts a stock, they’re betting the stock price will go down between the time they sell and repurchase the stock. A meme stock is a stock that has seen an increase in volume not because of how well the company performs, but rather because of hype on social media and online forums like Reddit. For this reason, these stocks often become overvalued, seeing drastic price increases in just a short amount of time.

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Some limefx meme stock investors make big profits, but many don’t—because perfectly timing when you buy and sell stocks to make money is often tricky. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. In 2023, the movie Dumb Money told the story of Gill and his earlier meme-stock journey.

Palantir is a data analytics company offering its Foundry and Gotham platforms to government and commercial businesses. Former PayPal founder Peter Thiel and the current CEO Alex Karp founded the company. Will Forex atr Palantir ever become the company that investors believe it can be? That remains to be seen, but several big investors, including Ark Invest’s Cathie Wood, hold significant positions in the stock. While AMC’s stock has never reached the heights of GameStop, it arguably has a strong legion of followers. AMC Apes are all over social media and have even named CEO Adam Aron the Silverback.

As such, any recommendations or statements do not take into account the financial circumstances, investment objectives, tax implications, or any specific requirements of readers. When covering investment and personal finance stories, we aim to inform our readers rather than recommend specific financial product or asset classes. You’ll also want to make sure that your decision to buy a meme stock isn’t driven by FOMO (fear of missing out). That’s a type of emotional buying that may cause you to make decisions you’ll regret. Meme stocks are highly volatile, meaning that you can lose a lot or everything when the price plummets. Owning one can be anxiety-provoking, too, as you watch the stock price zoom up and then plummet.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Perhaps more importantly, it’s critical for you to have good reasons to invest in anything. Stick to making investment decisions that are right for your specific situation. Following the herd or any other impetus that is not grounded in a strong fundamental basis for investing your money is never prudent. The result has been a collection of stocks featuring unusual trading activity and significant volatility. A member of the hot 2020 IPO stock class, Palantir quickly gained a large investor following after making its public debut.

Where to put your money instead of meme stocks

In comparing various financial products and services, we are unable to compare every provider in the market so our rankings do not constitute a comprehensive review of a particular sector. While we do go to great lengths to ensure our ranking criteria matches the concerns of consumers, we cannot guarantee that every relevant feature of a financial product will be reviewed. However, Forbes Advisor Australia cannot guarantee the accuracy, completeness or timeliness of this website.

If your goal is to buy a house, save for retirement, or otherwise increase your financial security, you might consider a fundamentals-based investing strategy that isn’t guided by Reddit, TikTok, or any other media platform. “A meme stock is any publicly traded stock with a price performance that’s strongly influenced by activity on social media,” according to Britannica Money. As with other highly volatile investments (such as the related cryptocurrencies movement), there are drawbacks to betting on meme stocks. The meme stock movement unofficially started in the summer of 2020, when most people were stuck at home during the first few months of the pandemic. Looking to turn some of that extra free time into money, many people turned to the stock market and social media for ideas. The word “meme,” from the ancient Greek word “mimema” — meaning imitation — is used to describe information that is imitated and often spread via pop culture references on social media.

How meme stocks work

• You have the option to trade stocks instead of going the options trading route if you wish.
• Our live streams are a great way to learn in a real-world environment, without the pressure and noise of trying to do it all yourself or listening to “Talking Heads” on social media or tv.
• However, for those seeking sustainable long-term gains (the way real multigenerational family wealth is built up), look to build a portfolio of multiple meme stocks that have more than just a one-off chance of providing returns.
• These short-term surges can often reverse course just as quickly, though, making meme stocks far more volatile than average stock market moves.
• Meme stocks are a relatively new phenomenon, beginning in late 2020 and early 2021.

But we also like to teach you what’s beneath the Foundation of the stock market. We also offer real-time stock alerts for those that want to follow our options trades. You have the option to trade stocks instead of going the options trading route if you wish.

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For the right person, investing in the right meme stock for the right reasons can make a lot of sense. Both companies also allow investors to buy fractional shares of stocks, so you can buy a piece of the action without getting in too deep. Experts generally suggest keeping individual stock picking limited to 5% to 10% of your overall investment portfolio. While some thought that the meme stock craze would be short-lived, the phenomenon remains in force years later. Meme stock communities pumped the brick-and-mortar retailer Bed Bath & Beyond (BBBY) to extreme levels in the summer of 2022, when it was up 314% for a short period before crashing back down. These are other assets that Elon Musk loves to pump up through social media, most notably DogeCoin.

The opinions expressed are the author’s alone and have not been provided, approved or otherwise endorsed by our partners. Former president Donald Trump’s social media company, Truth Social, could be considered a meme stock. Meme stocks became all the rage among retail investors during the COVID-19 pandemic. Meme stocks are created when a company’s shares catch fire with individual investors on social media platforms such as Reddit and quickly skyrocket in price.

We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. We will help to challenge your ideas, skills, and perceptions of the stock market. Every day people join our community and we welcome them with open arms. Each day we have several live streamers showing you the ropes, and talking the community though the action. To close the short position in the stock, short-sellers need to buy their shares of the stock. This creates an environment where all shares are bought simultaneously, sending the price to the moon.