Shares in this article
?? GameStop’s decline in the share price after a short soaring flight should have brought heavy losses to many investors
?? Experience with GameStop is both a curse and a blessing
?? Experts expect positive effects on the financial literacy of the massesAt first it sounded like a modern fairy tale: At the end of January, numerous users agreed to buy GameStop shares via the Internet platform Reddit in order to wipe out the “bad” hedge funds that had bet on short sales against the paper. To make the story perfect, most of the stock was bought through Robinhood and other trading apps. But the rude awakening followed quickly: After only a few days of soaring, GameStop shares collapsed again and fell from their high of 482.95 US dollars to currently 41.16 US dollars (as of February 19, 2021) . It is still around 118 percent higher than at the beginning of the year, but that should hardly be of any use to most private investors who have let themselves be carried away by the hype. Because anyone who was not there from the start and was only tempted to buy GameStop shares by the rapid rise in the share price and the media coverage and still wanted to jump on the bandwagon, should have lost some money now.
But there could be a good side to the whole thing, experts believe. Because losses also teach you more about the functioning of the stock market and stock trading. “We hope that people didn’t burn their fingers in the situation, [sondern] that it has aroused their interest in the market and that they learn something about the need to invest instead of gamble, “said Ken Zendal, head of the National Association of Investors, in relation to” MarketWatch “. According to him, far too many have become so far People renounce stocks as a fundamental building block of wealth creation – a situation that could now change due to the GameStop hype and the associated higher interest in stocks in sections of the population who were previously not interested in stock trading.
GameStop hype leads to new shareholders
“While I have some concerns about the full aftermath of GameStop, it seems like it has led to a renewed understanding that even the average person with no financial background or Wall Street experience can invest,” said author Erin Lowry opposite “MarketWatch”.
The numbers seem to confirm this. According to a survey by “Cardify”, which is available to the online magazine, around 44 percent of 1,600 self-employed investors surveyed by the games retailer GameStop and the also hyped cinema chain AMC had previously had less than a year of trading experience. Another 25 percent would have had up to two years of experience on the stock market before investing in GameStop and Co.
With GameStop, people seem to be thinking about money and talking about investing who haven’t done that before. For example, company coach Jay Varcoe is impressed on his website that even the younger generation is talking about buying shares and encouraging each other to invest. He observed this in his son and his friends, who are all around 18 years old. This development is viewed positively by experts, after all, hardly anything has changed in the US in the past ten years in terms of the shareholder ratio. As “MarketWatch” writes, citing data from the market research institute Gallup, only 55 percent of all Americans held shares last year – about as many as in 2010. In Germany, according to data from Deutsche Bank, only around twelve percent of the population is based Securities – and that in a time of low interest rates. So there is an urgent need for more people to look into stocks.
The GameStop hype could possibly do that.
Financial knowledge for many new shareholders is rather poor
But while the appetite for stocks is now apparently increasing, according to “MarketWatch”, the financial knowledge of many new investors remains rather poor – and that could put them in serious danger. According to information from the online magazine, some Reddit users have used all of their savings or invested borrowed money to be part of the GameStop hype. Apparently they bet on a quick profit – and have now been brought back down to earth. An investor who is several hundred dollars in the red with his investments in GameStop and AMC told “MarketWatch”, however, that this experience was an opportunity for him to learn more about stock trading and to think more long-term and to consider fundamentals . But it won’t stop him from trading stocks in the future.
The experts are hoping for this attitude from as many shareholders as possible, who have now gained initial experience on the stock exchange with GameStop and Co. Because as Tim Ranzetta, founder of a non-profit financial consultancy for the younger generation, writes in a guest article for “CNBC”, the GameStop hype was a lesson in terms of equity investments. It showed the disadvantages of a lack of diversification – or the advantages of a broadly diversified portfolio – and the dangers lurking in day trading. At the height of the GameStop hype, according to Ranzetta, all outstanding GameStop shares were traded four times in just one day, which shows that this was not about sensible and long-term investing, but only about extremely short-term gaming, which for many likely to have ended in a loss. However, this experience could possibly lead to a growing interest in learning about the right way to invest in some people – after the initial shock. At least that’s what experts like Ranzetta, Zendal and Lowry hope for.
Finanzen.net editorial team
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