Salvador Vergara was so enthusiastic about GameStop Corp at the end of January. that he took out a personal loan of $ 20,000 and used it to buy shares. Then the buzzing share dropped almost 80%.
GameStop’s volatile ride hits the portfolios of individual investors such as Mr. Vergara, who bought the stake in a social media-fueled frenzy. These informal traders say GameStop was their “YOLO”, or “you only live once” trade. They bought the end of January peak, and it bet it would continue its astronomical climb. While some paid out before it crashed, others who hung on to their shares are in the red.
Mr. Vergara, a 25-year-old security guard in Virginia, began investing four years ago after deciding he wanted to retire young. To save money, he drives a 1998 Honda Civic, eats a lot of rice and lives with his father. He kept most of his savings in diversified index funds, which are now valued at about $ 50,000. Then Mr. Vergara, a longtime reader of the WallStreetBets page on Reddit, others who post about buying GameStop shares and the colossal rise in the stock.
He did not want to touch on his index fund investments, but obtained a personal loan with an interest rate of 11.19% from a credit union and used it to finance the bulk of his GameStop purchase. He bought shares at $ 234 each.
GameStop shares started the year around $ 19, increased to nearly $ 350 (and nearly $ 500 in intraday trading), and then began to turn back to earth. The stock closed at $ 52.40 on Friday, which was 85% lower than the high.