"Meme stock generation” over image of an excited gamer on a computer

AMC Entertainment. BlackBerry. GameStop. At times in the past year, it felt like it was a meme stock world, and we were all just living in it. In January, we passed the first anniversary of the meme stock phenomenon taking off (or headed “to the moon,” as many meme stock enthusiasts might say), and the trend isn’t exactly slowing down.

It was only about a year ago that investors across the Reddit forum r/wallstreetbets began buying GameStop (GME) stock in earnest, causing the price to skyrocket. Why did they do this? Well, it began when investors noticed a high number of hedge funds shorting the GME stock (a.k.a. betting against it, in hopes of making a profit from a predicted price plummet). Forum participants made the opposite move: buying up GME stock to raise the price and undermine the hedge funds — although the phenomenon has reached beyond just a movement against Wall Street.

By January 2021, GME reached a peak of $483, an increase of almost 12,000% from the previous year when it was trading at $4. At this point, investing in stocks in similar situations grew in popularity, and the meme stock phenomenon was born.

Now, a year later, what does the phenomenon mean for the meme stock investor? Ally conducted a survey in January 2022 to find out.

Infographic titled Meme Stocks: A 2021 Phenomenon featuring statistics from an Ally Consumer Research Survey of 2,000+ U.S. consumers in January 2022. Who invested? More than 2 in 5 consumers had invested in meme stocks in the last 12 months (66% millennials and 63% with fewer than 5 years of investing experience). 47% invested less than $500 (excluding their 401(k), 62% of this group has only $5,000 or less in investable assets. Nearly 2/3 bought and sold on a weekly or monthly basis. Why meme stocks? While motivations varied, most investors wanted to boost income (50%) and optimize returns (41%), while only 16% stated they wanted to participate in a movement against Wall Street. How did they do? Overall, investors were equally likely to report that the value of their investment had increased or decreased in value (both at 39%). 82% of meme stock investors still own one or more, and 53% say they will invest in meme stocks again in the next 12 months. Larger investors (invested more than $500) were 20% more likely to hold onto their shares than smaller investors (95% vs. 79%).

Who are meme stock investors, and where are they now?

Those buying and selling meme stocks aren’t your veteran investors with lots of experience in the market. According to our recent survey, while more than two in five consumers invested in meme stocks in the last 12 months, 63% of those meme stock investors have five years or fewer of investing experience. These traders tend to be male and affluent, while two-thirds are millennials and are more likely to have a household income of greater than $100,000.

Despite most meme stock investors holding full-time jobs, they’ve found time to trade their holdings frequently in the past year. That’s because they’re primarily investing via online brokerages and newer digital investment platforms. Because these tools make trading easier, meme stock investors constantly check their trading accounts. Notably, consumers were more likely to cite boosting their income or optimizing portfolio returns as their motivation for investing in meme stocks, while only 34% cited their own research as a primary driver.

Why do people invest in meme stocks?

News headlines may lead you to believe the meme stock phenomenon is a revolt against Wall Street, but only 16% stated they wanted to participate in that social movement. And only a little more than one-fourth of meme stock investors say they decided to invest based on r/wallstreetbets.

Instead, meme stock investors (like most investors in general) are investing to make money. But is that a realistic goal, especially considering more than half invest less than $1,000 on meme stocks?

Investing in meme stocks is a gamble. Their bouts of popularity and high volatility mean that you’ll take a lot of risk with only a chance of earning a profit. But that doesn’t seem to worry many meme stock investors. They’re less risk-averse and less experienced in stock market moves, and they’re also interested in other risky investment opportunities like cryptocurrency and NFTs. In fact, more than six in 10 meme stock investors also own crypto.

Are meme stocks here to stay?

Based on current behavior, the meme stock phenomenon isn’t likely to fade out any time soon. Eighty-two percent of people who invested in meme stocks still own shares. The volatility associated with them has meant some investors made a huge profit, while others earned little to nothing and some even lost their investment. Yet the majority plan to invest in them again in the next 12 months — despite realizing the high level of risk that’s associated with adding these types of investments to their portfolio.

Meme stocks will continue to be risky, but one thing is certain. The phenomenon has created the possibility that these trendy investors begin investing in more traditional stocks, growing their interest in the market as a whole.

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