What Investors Can Learn From Reddit, Gamestop, and Market Manipulation Claims
Being in heavy loss, heading towards bankruptcy, 1,000 stores closed down and yet suddenly have a share that is more popular than Apple or Tesla. This is what happened to GameStop – pretty much the American version of GameMania – that has become the site of a remarkable battle between an army of small investors and the big bangers of Wall Street.
The goal of this modern David versus Goliath is simple: get the great men to their knees. Although it is now also causing some swell on the European stock markets.
For the past few weeks, discussions on AmonAvis have been dominated by market manipulation: GameStop, short squeezes, Reddit frenzy, and other rare topics. The big news was the sharp rise in the share price of GameStop, a video game retailer that many investors thought was slowly dying.
The price apparently rose because a large number of members in a forum on the Reddit website said that investors should buy the shares. The above perspective makes it easier to understand these events and what investors can learn from them.
Control of Brokerage Transactions
Today, many investors trust brokers like Libertex to know when to buy and sell. While they are reliable, others may not be. Investors learned this the hard way when popular trading app Robinhood stopped allowing GameStop trades.
An investor should understand that GameStop’s massive volatility could cause a lack of control over when they can trade and that they could get caught out in the cold in the process. Also, there are high fees that come with day trading that compound the cost of transactions on the tax side.
Have Control Over When You Buy and Sell
An investor should know how to make money in both a bull and a bear market. True financial reward – sometimes referred to as “delayed gratification” – is after an investment becomes profitable and can be sold. Investors should understand that they have no control over when to buy or sell a stock like that of GameStop. They would simply have to keep an eye on the market and make a judgment based on how much it was going up or down, often on any given day. They can decide when to sell, but that’s not the real control.
No one was looking to hold onto GameStop stock for the long haul and in this case, market conditions will compel you to either buy or sell.
Control of Income / Expense And Asset / Liability Ratios
An investor should focus their time and energy on buying assets that yield interest, not on liabilities. One of the lessons an investor can take from the GameStop craze is that it is not an asset that provides cash flow, it is simply betting. Betting that the stock price would go up, but it could also crash. Gambling may be fun, but it is not an investment.
The GameStop saga is a battle of the new school against the old school, amateurs against professionals, and rebels against the established.
At the moment, the boys are winning. But, like all bubbles, this one may burst at some point.
