Funds that track the S&P 500 are generally an effective way to earn a good return on your money over time. Historically, the average annual return for the S&P 500 hovers around 10%. Though the idea of amassing crazy wealth overnight is obviously appealing, the reality is that the odds are heavily stacked against anyone trying to outsmart the market.

GameStop phenomenon

Logically, this makes sense since the fundamentals usually determine a company’s underlying stock price. This negative sentiment causes short interest to rise, another key factor for meme stocks. Meme stocks should have social media buzz, a huge rising volume and a small float.

• The company also sells kitchen utensils and products from cutting boards to measuring cups.
• Simply put, meme stocks skyrocket in price in a short period (often hours or days) because of a sudden surge in interest online or on social media and subsequent buying among small individual investors.
• The more irrational it is, the more likely short-sellers get involved and the more potential it has to short squeeze.
• Ultimately, the stock price surge had no value-driven characteristics, instead, it was because the communities of retail investors who began buying the stock gave the stock value, making the stock’s price increase dramatically.
• This was part of a broader trend where hedge funds took heavy short positions in so-called meme stocks, popular among retail investors.

This rapid price appreciation caught short sellers off guard, resulting in significant losses estimated at over $1.3 billion in just the two days following Gill’s tweets alone. The YouTube persona Roaring Kitty posted a future viral video laying out the case for why shares of brick-and-mortar video game retailer GameStop Corp. (GME) could soar from $5 to $50 per share in August 2020. A meme stock refers to the shares of a company that have gained viral popularity due to heightened social sentiment.

This resurgence has made the meme stock market even more exciting, with unexpected changes happening overnight. If you’re looking to find the next meme stock and capitalize on viral trends, this guide will give you the insider tips and strategies you need. Less than two years later, after the initial meme stock craze had largely died down and in true fxopen review meme stock fashion, Roundhill announced the closure of the Meme Stock ETF. According to media reports at the time, the reason for the closure was lack of interest from day traders and too little trading volume.

How meme stocks work

UPST shares are up over 430% in 2023, propelled by its 37.44% short interest. All forms of investments carry risks and trading CFDs may not be suitable for everyone. CFDs are leveraged instruments and can result in losses that exceed deposits, so please ensure that you fully understand, and are aware of, the risks and costs involved.

In January 2021, Nokia’s share price jumped 106%, causing a short squeeze. Like GameStop, however, its price subsequently declined, settling around the $4 mark by late 2022. For those still itching to trade the next viral stock, invest only with money you can afford to lose. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. Allogenic CAR-T is also called “off-the-shelf,” where other T-cells are donated rather than a patient’s, allowing for speedier and more consistent treatment. One of the biggest threats is the potential for graft-versus-host disease (GVHD), where the donated T-cells attack the patient’s healthy cells as it views them as foreign.

Fueled by online forum discussion, especially on Reddit, Cohen attracted an army of believers in his strategy that sent the value of GameStop stock to as high as $81.25 after never breaking $14 a share. GameStop followed suit in 2021, raising nearly $1.7 billion via a secondary offering of 8.5 million additional shares at an average price of more than $200 per share. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses.

Top holdings in the portfolio include Robinhood Markets, Microstrategy forex broker (MSTR 9.94%), and Palantir. This ETF has an annual expense ratio of 0.75% (meaning it costs $7.50 per year for every $1,000 invested). As with other highly volatile investments (such as the related cryptocurrencies movement), there are drawbacks to betting on meme stocks.

Financial Calendars

Check out our list of six that could be the next meme stock to make headlines. Here is a list of six stocks that may usher in the next meme stock frenzy or just short squeeze by themselves. While everyone wants to know, “What is the next meme stock to surge?” it’s important to know what happens to most meme stocks. In 2021, retail investors bet big on so-called “meme stocks,” with the goal of making money and upending power dynamics on Wall Street. Initially, AMC faced significant financial struggles due to the COVID-19 pandemic, with widespread theatre closures and mounting debt.

Investing in meme stocks and ETFs

Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. GameStop was unique because it had a 140% short interest, which is only possible through extensive naked shorting. That was the fuse triggering the short squeeze, which then took on a life of its own as it moved higher. Even GameStop can’t be the next GameStop stock with just a 16.95% short interest repeating what happened at the dawn of the meme stock bubble.

What the Latest Craze Says About Investor Behavior

Investing in meme stocks requires precise market timing, a skill that even professional investors struggle with. Additionally, predicting which stocks will surge and which will not is nearly impossible. Influential figures in the finance world, such as well-known traders, analysts, and social media personalities, can have limefx forex broker review a significant impact on stock prices. Following these figures can provide insights into which stocks might become the next big thing. In late January 2021, regulators began monitoring trading activity for meme stocks. Concerned about potential market manipulation and overall stability in the financial markets, the U.S.