The retail community continues to move stocks more than a year after the initial craze for meme stocks in early 2021.
The founder of r/WallStreetBets, a Reddit forum for retail traders to discuss stocks and options, had some advice for the community: The best financial education comes from the school of hard knocks.
“I learned a lot from my experience,” r/WallStreetBets’ Jaime Rogozinski told Yahoo Finance Live (video above). “There is one thing about the stock market that no book can teach you, and that is to control your emotions and be able to think rationally when you are in a trade.”
Rogozinski emphasized that traders of all levels, especially those new to trading, should not be afraid of making mistakes. Losses are inevitable and are key to gaining experience in the market.
“Often these retailers use smaller amounts of money,” Rogozinski added. “They can afford to lose 100% because we’re talking about $100 or $50, you know? This is the cost of training. They can go through, get their hands dirty and find what they like.”
Trading memes for investment
R/WallStreetBets subreddit was established in January 2012 and now boasts over 12.5 million members. The page went viral for its involvement in the short-shrinking craze and the retail trade that sent GameStop (GME) shares soared in early 2021 and led to a congressional hearing.
“One of the things about retailers, WallStreetBets, is that they’re a collective,” Rogozinski said. “This is not an individual. People come together and decide collectively.”
Rogozinksi explained that retailers tend to be younger and more “careful” with their finances.
On r/WallStreetBets, “what it allows them to do is learn about it in a fun way, speaking a language that makes it accessible,” Rogozinski said. “I often say that … the concepts that CFAs, the Certified Financial Analysts, have or [those with a] master’s degree, they just have a lot of jargon for concepts that aren’t really that complicated. In WallStreetBets, you have exactly the same concepts, but they have easier words, or they’ll have different words that sometimes make it more cartoony, funnier, more meme-like.”
Gallup May 2022 research found that 56% of US adults, a total of 144.6 million people, owned stocks, including 25% of households earning less than $40,000 a year.
While many shareholders invest for the long term for purposes such as retirement, Rogozinksi noted that meme stocks are a different animal entirely because of their unpredictability.
“These are not investments, these are transactions,” explained Rogozinski. “So if you want to get into a highly volatile trade like GameStop or like a meme stock, you need to know how to trade it properly.”
Meme stocks are typically consumer-facing companies that marketers already have a relationship with, such as the aforementioned GameStop, AMC, or Bed Bath & Beyond.
“You have to have stock for a company that’s tangible that retailers can relate to, not some obscure, I don’t know, chemical materials company,” Rogozinski said. “It’s a store you can go to, it’s a car you can drive, it’s a chip you can put in your computer.
Meme stocks have ‘reminiscent ingredients’
Although r/WallStreetBets is an incubator of meme culture, Rogozinski does not consider himself a meme trader.
“I have a very particular trading style and it’s not meme trading in stocks – I’ve never understood that,” he said. “But I’m definitely happy with what’s going on and it’s definitely a very new phenomenon that I’m not sure a lot of people have really grasped.”
Rogozinski’s comments were on top of a meme fueled rally at Bed Bath & Beyond (BBBY) availability. The retailer’s stock subsequently took a nosedive after activist investor and GameStop chairman Ryan Cohen liquidated his 9.8% stake in BBBY for $68 million.
At the time, the stock hit a high of $28.04 on August 16 before falling 30% that day. Since then, activity in the stock has cooled somewhat, although the stock was still up more than 92% for the month of August.
Although he hasn’t personally invested in Bed Bath & Beyond, Rogozinski is still “on board” with the idea of it being a meme-stock business.
“You can see there’s a lot of similarities with GameStop,” Rogozinski said of the hype surrounding the brand and its volume of trade. “We’re getting a lot of reminiscent ingredients we saw at GameStop.”
Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.