A. The name ‘meme stocks’ is new and really, a child of the era of social media. In broad terms, it just refers to stocks that have experienced significant price fluctuations in a very short period of time as a result of comments and the like on social media platforms including Reddit and TicToc. Perhaps the best-known one of the meme stocks in recent months has been GameStop which since the beginning of the year saw price increases of 1600% in the space of a week or so. But unlike stocks in a particular industry (technology) or perhaps meeting a specific style of management approach (ESG), meme stocks generally rise in value (and to fame) simply due to a fear of missing out (FOMO).
One characteristic that can often be common is that stocks can often lack some of the fundamentals that should underpin the valuation of any stock (earnings, profits, potential) and can sometimes be driven simply as a counter-revolution to many investment norms.
Of course, as the old expression goes, by the time you might hear about such stocks, it can often be too late. Finally, when it comes to investing, never forget the basic rules. Investigate the potential of the investment and plan over a 3 – 5 year period of time. On the other hand, if you want to speculate on stocks that have little connection to the foundations of sound investing, just make sure you can afford to absorb any financial losses that may occur.
‘Questions From The Floor‘ are received via the MoneyWhizz financial wellbeing seminars used by leading employers are part of their employee wellbeing initiatives.