Sophia Coffey, a 19-year-old student at Arizona State University, caught 185 shares of AMC Entertainment during the Covid-19 pandemic. For about $ 2 to $ 7 per share, she bets that the film chain will recover financially after the pandemic. To her surprise, the investment paid off before Covid-19 restrictions were lifted: the GameStop stock catapulted the value of $ AMC to $ 20 per share by the end of January, as amateur investors arranged to artificially measure the market performance of some declining companies. increase, including AMC. Coffey decided to sell a few days later before it sank, which reached about 400 percent, but she still holds on to about 85 shares if the value of AMC will rise once the theaters reopen.
The GameStop saga, started by a contingent of traders from Reddit’s r / WallStreetBets forum, invited overwhelming attention and exploration into the world of day trading and the motivations of young investors like Coffey. Of particular importance are the online communities that drive this risk-averse group of traders. On platforms like TikTok, Reddit and Discord, people share bite-sized investment knowledge, questionable advice and memes. These spaces, like most subcultures on the Internet, communicate through niche lingo, and from the perspective of an outsider – Wall Streeters and the financial press – it is easy to combine these memetic tendencies with a lack of knowledge of the stock market.
Members of Gen Z may be the youngest investors to enter the market, but most adhere to the financial basics endorsed by the baby boomers, Gen Xers and millennials who came before them. They read Warren Buffett, open retirement accounts and aim to diversify their portfolios. But unlike their older people, more young people seem to be aware of the direct impact that social media can have on the stock market, and how the market is not an accurate reflection of Americans’ financial reality.
The short print of GameStop taught young, interested spectators a few things about markets: Everyone – hedge funds, asset managers, banks and brokers – trade for profit, and the smallest private traders are the least likely to succeed. They also largely realize that programs with low or no fee trading are unlikely to cause such a march to take place again. But if you’re a teenager, these events are exciting, and ‘fuck the system’ may sound like a good rally to catch up.
“I think teens are aware that there’s some kind of market manipulation going on on Wall Street,” said Kiran Boggs, a 17-year-old senior high school leader who runs the @generationzillionaire Instagram page and financial news, tips and memes for a Gen Z-hearing. “After seeing what r / WallStreetBets can achieve, I think more people are now interested in investing, whether it is passive or really risky to invest.”
The teens I spoke to were mostly risk-averse investors. While they enjoy occasionally giving a “share” or a share, just to take part in the trend, most aimed to be considerate about their investments and hedge their portfolios for growth in decades. . “I wish more investments were promoted in the long run,” Coffey told me. ‘I know some kids who make poor investment decisions and think they can make money fast. I’m definitely not like that. ”
Her mindset does not reflect all young traders, especially not newcomers to the digital trading floor through free fees like Robinhood and Acorns. These platforms have made investing accessible and easy for ordinary people; the increasing participation in the stock market is only positive, these applications claim. By simplifying the trading process with friendly emoji and virtual confetti, it is easier for users to buy and sell shares, and sometimes several times a day.
Day shopping also increased dramatically during the pandemic, reports CNBC, as more people are at home and out of work. This is when it can get worrisome. For personal financial consultants, experienced investors and spectators, the concern is that young people may be lured into a pattern of obsessive trading. As a serious warning, some cite the tragedy of a 20-year-old Robinhood day trader, who killed himself after mistakenly thinking he owed the app $ 730,000.
“It’s risky as hell, but holy cow, it’s almost like getting a high point,” a 21-year-old trader told the New York Times. Some will raise more and more money to chase the dopamine of higher and higher yields. The stock market continued to rise after a brief dive in March last year, but the upward momentum will not last forever. “Building wealth takes time,” said Ryan Francis, a personal finance TikToker. ‘If you look at the data on day trading, a majority of people lose money. It’s almost impossible to beat index funds in the long run, and it’s just very risky. ”
The stock market seems to be a gateway to financial freedom and happiness, especially for those with a lower income group, who tend to have lower financial literacy. “It’s really great that more people are interested in investing,” Francis told me. ‘But do not confuse investments with gambling. It’s a horrible idea to put your life savings in GameStop or Dogecoin or AMC and hope you get rich. Smart investing takes decades. To be honest, it can be boring. ”
Curious teenagers have long maintained a relationship with the stock market. Aside from the benefit of having more free time as adults (and probably less money to burn), many teen traders are also outspoken about their cynicism towards the Wall Street forces. Jonathan Lebed, a 15-year-old man who was allegedly prosecuted by the Securities and Exchange Commission for the stock market fraud, told the New York Times in 2000: ‘Whether a company makes millions or loses millions, it has no impact on the price of stock. Whether it is analysts, brokers, advisors, internet traders or the companies, everyone is manipulating the market. If it were not for everyone manipulating the market, there would not be a stock market at all. ”
Like Lebed, the teens I spoke to are well aware of the interests and speculations of trade. “I’m a liberal who advocates certain socialist policies and that investments be taxed more,” said Coffey, an Arizona student. “But I realize we have a system that works a certain way, and I might as well use it to my financial advantage to secure and grow my savings.”
Matthew, a 17-year-old high school boy from Studio City, California, who asked for her omission for privacy reasons, told me he trades with the understanding that private investors, compared to Wall Street hedge funds, on a disadvantage. Hedge funds basically call the United States a free market if it is to their advantage, ‘Matthew said. ‘However, as soon as it harms their wealth, [Wall Street] can close the whole case. It’s staggering. ”
Since starting trading under a supervising Robinhood account in March 2019, Matthew has been intrigued about how a company’s market performance has been relatively separated from scandals or bad press. The GameStop episode was a groundbreaking departure from the norm. “Only with the GameStop case did Reddit buy investors to buy against the shortfall,” Matthew said. “As an observer, I spent about $ 10 on GME just to be a part of it.” His takeaway was that social media could move markets if there were enough people on board.
For Terry Turner, a 17-year-old contributor to the personal finance website Teen Financial Freedom, meme stocks are fun to let in a few bucks as long as he adheres to the principles of investing for his larger portfolio. “The wonderful thing about starting young is that you have time on your side,” he told me. “If you’m younger than 18 or living with your parents, you can afford a little risk, but you should always do research and learn about the basics of investing.”
Turner began investing in cryptocurrency in 2018, and although the value of his portfolio has fluctuated over the years, he has not sold many shares. “As young people, we can buy at a low price and it can last for years, even decades,” he said. “If you believe in the fundamentals of investing in the long run, your stocks need to perform well in the short term.”
The problem is that not all young investors trade with Turner’s long-term mentality. Courses on personal finance are not a high school requirement in most states, and many teens are not financially literate. They also come of age when excessive casino capitalism is particularly damaging: the pandemic has left millions of Americans out of work, and many are being forced to take low-paying, essential jobs to survive. Increased participation in stock markets should be a good thing, but the markets do not reflect the income inequality and instability in homes that plague low-income communities. And while Robin Ten CEO Robin Tenev has outlined investments as the new American dream, the app has provided few backrests that limit irresponsible trading. History has shown that the recent recessions have redistributed wealth to the asset class.
Boggs, the teenager behind the @generationzillionaire Instagram, told me that he has no doubts about the power of a forum like r / WallStreetBets. But despite how “exciting” the protest was, Boggs acknowledged that the current situation for young newcomers seems “extremely risky” to throw in a lot of money. Amateur day traders are in a precarious position to compete against Wall Street hedge funds that have walked away unscathed from financial crises.
“I’m glad it gave people the opportunity to realize how much power you can have if you’re actively interested in investing,” he concluded. “I do not want them to be risky or manipulate the market by pumping a stock until the SEC comes in, but it’s a good reminder that smart investing is something you should consider.”