What are Meme Stocks?

Stock Investment refers to long term investments in shares which hold long term goals. Trading and investing in stocks helps in economic growth and facilitates companies to pay off debts and loans and to expand their business. 

 

When investors invest in a company, they are benefitted as they also earn a share in the companies profit. To learn more about Stock Market Investment check out our blog on Stock Market Analysis. 

 

What are stocks?

 

Stocks can also be called equities.  It refers to  an investment which represents  an ownership share in a company. A stock, in simple words, is an investment. Dig deeper into the stock world and check out the meaning and working of cyclical stocks. 

 

(Related Reading: Equity Financing: Sources, Advantages & Disadvantages)

 

Investors buy and sell ownerships, securities, bills to create stock investments. A stock market is where these stocks or equities are bought, sold or exchanged. To understand the basics of trading check out our blog on Binary Trading. 

 

(Must Check: 10 Principles to keep in mind for Effective Trading)

 

 

What are meme stocks? 

 

Today, social media has become an important element in the business/market world. It hosts platforms which popularise businesses and help in sales. Meme stock also rose from social media. Discover more about social media via our blog Social Media Marketing. 

 

(Related Blog: Meeting CEO of MemeChat, Kyle Fernandes: Mogul of Meme World)

 

Stocks gain popularity because they are advertised and hyped up on social media, for example: Reddit or Twitter, an online platform that showcases stocks; increase or decrease in stocks.

 

You might want to learn more about the science behind social media check it out here. 

 

This is not entirely a result of the performance of a company but more of a result of the hype about a company on social media platforms. Using humour or joke-language draws attention and are regarded as memes that are currently trending. 

 

(Related Reading: Top 8 Virtual Reality Stocks to watch out for)

 

Social media has helped greatly in the spread of meme stocks across the globe.

 

Meme stocks basically refer to stocks going viral on social media just like memes. The trend of meme stocks shot up enormously during the pandemic ; Covid-19, when almost everything was known with the help of social media. 

 

You might want to understand one other category of stocks i.e. Lupa Stocks

 

 

Advantages of Meme Stock Investing 

 

 

1.  Facilitates the rise of Retail Traders:  Retail investors have put forth the need to be taken more seriously by the rest of the market. “Barron’s reported that 58% of day traders in a survey said they plan on trading even more in the future, a sign that meme stocks and retail participation in stocks is not just a Covid trend.” ~ ParentPortfolio.com

 

2. Brings in Younger Investors: Meme stocks have come to be hyped- up on social media. As a result, younger investors have learned more about investing and trading through these social-media platforms such as Twitter, Reddit, etc.  Therefore, young investors can now be part of the stock market and invest in meme stocks. 

 

(Related Reading: AI in Trading Technology & Stock Market Investing)

 

 

 Disadvantages of Meme Stock Investing 

 

 

1.  Lack of Fundamentals: Meme stocks tend to go viral not because of the productivity or strength of the underlying business, but because of the hype that advertisements create on social media platforms. 

This factor puts meme-stock investors at greater risk of downward share performance, if the fundamentals of the business disappoint when the economy goes down the lane. 

 

2. High Volatility: The volatility of meme stocks shows that investors are at greater risk of falling into losses or seeing their portfolios underperform in the coming years.

 

(Related Reading: Commodity Trading: An Overview)

 

For example,” when trading was halted on GameStop, investors potentially couldn’t execute sell orders.” Studies conducted previously , have shown that passive, diversified investments tend to outperform active trading over the long term. 

 

You can take a look at our blog on Margin Trading to get more insights of trading. 

 

 

Top 3 Meme Stocks

 

 

1. The GameStop (GME)

 

A  popular example of meme stocks. GME is an American video game and electronic merchandise retailer which is also among the largest video game retailers in the whole world and is also regarded as the first meme stock. 

 

(Related Reading: Top 10 Virtual Reality Games)

 

 

2. BlackBerry (BB)

 

Another example of meme stocks, a Canadian company that deals with enterprise and security software services. The shares of this company were prominent as they hit a boom during the pandemic in May 2021. 

 

The company also signed a 5 year partnership with the University of Waterloo which means that there is scope and hope for numerous projects coming from this company in the upcoming years. 

 

Watch out!! Keep your eyes intact on this one, you do not want to miss out on the opportunities this company has to offer. 

 

 

3. NOKIA (NOK)

 

The new generation is filled with tech-heads , Nokia was involved in the 5G technology recently and gained attention for the same as a new tech upgrade. It came into light and became the company that the WallStreetBets began to eye.

 

You might want to learn more about 5G networks and its connection with the IoT. 

 

Currently, it has an immense and the largest market of the ones mentioned above and is seen running in almost 130 countries across the world. 

 

“Therefore, some investors may see Nokia not simply as a meme stock but as a company with long-term investment potential, dividing investor sentiment​.” ~ CMC Markets. 

 

Conclusion

 

To conclude, it can be said that meme stocks seem to be on the rising scale as it has welcomed many young investors and proves to have a future with evidence as companies such as Blackberry are signing partnerships which will further give rise to development and opportunities and attract more investors.

 

It can also be said that the whole idea behind meme stocks is driven by the Fear Of Missing Out. This FOMO invites and attracts young investors or most investors from social media, as they see the existing investors posting about their earnings and gains on social media.  

 

Nonetheless, one should study the market well before investing because stocks can put an individual into a loss or be rewarding. “Successful investing is about managing risk, not avoiding it”. ~ Benjamin Graham.