Stock Market
Social Media ‘Meme’ Investors Are Consistently Outperforming Institutional Investors
They laughed when it was suggested a man who calls himself RoaringKitty could be an intelligent stockbroker. Then the GME squeeze happened. Now the question is, who are these new age style teachers?
As Wall Street Quietly Debated Among Themselves….
Goldman Sachs started conducting research about whether or not Retail Investors actually were doing better than Institutional Traders. The results they found were unexpected, both to them and likely to a certain degree, the retail investors, us.
Goldman Sachs findings on the returns of retail investors, institutional investors, and the S&P 500 since March 2020 low
Stocks popular among individual investors are beating hedge fund and mutual fund picks, according to a new note from Goldman Sachs. The retail investor favorites have surged 61% since the bear market trough. This is compared to the 45% gain for institutional investor picks and the 36% rise for the S&P 500.
The biggest winners in Goldman’s Retail Trading Favorites Basket since March 23 are Penn National Gaming (+184%), Moderna (+127%), Tesla (+124%), MGM Resorts International (95%) and Royal Caribbean Cruises (+93%).
Here’s the source where I obtained the snippet of the Sachs Note:
You should check it out after you’re done here. It contains a lot of fascinating information that I’d like to discuss now but time is short.
As the findings show, most retail investors aren’t just a group of young amateurs, blindly gambling away their money in the markets. The Wall Street elites refused to acknowledge them (us) as a real threat. With their eyes closed, blind to the reality of the situation, retail investors continued to learn and grow, ignoring the rhetoric coming from the media.
They still weren’t taken seriously though, most “experts” chalking the short-term success of millennials up to them using their stimulus checks to gamble on highly volatile penny stocks, doomed to fail as their luck ran dry.
Ohhh were they wrong. Had they only taken retail investors seriously, perhaps then they could have avoided what was about to unfold. Unknown to them, the uneducated meme investors had a plan.
That’s where the subreddit r/WallStreetBets enters. They are the group mostly credited with causing the short gamma squeeze of GameStop.
This squeeze caused the Hedge Funds who had shorted absurd amounts of GameStop, (GME) shares to lose millions when they all panicked, trying to buy back the shares they shorted to cover their positions.
This only caused the price to go higher.
The squeeze peaked on January 28th, 2021 pushing the price of GME shares to a pre-market high of $500/share, and the intraday price hitting $483. That marks a nearly 30x increase of their $17.25 valuation at the beginning of the month.
In other terms, from 01–12–21 to the peak of the squeeze on 01–28–21, a mere16 days, shares of GME increased by 3,629.74%
This event led to the CEOs of Robinhood, Reddit, Citadel, Melvin Capital, and last but certainly not least, Keith Gill, better known as RoaringKitty, having to testify in front of the House Financial Services Committee.
The subreddit r/WallStreetBets gave credibility to these unconventional teachers, showing that they are sophisticated.
As if that Goldman Sachs research paper wasn’t enough.
So, an article like this wouldn’t be complete without mentioning them and their accomplishments.
I have to be fair in my assessment, pointing out that this study only dates back to the market crash in March of 2020.
Though I suspect this trend will hold as they continue to track the performance of retail investors in the years to come.
Anyway, I wrote this article to inform people about some of the ways to obtain an education, how to better yourself even if you don’t have the money to go to an elite college as some do.
So, now that my side rants out of the way, let’s get into what I should’ve already been talking about in the first place.
I really need to work on staying on topic…
How The Pandemic, YouTube, And $0 Commission Brokers Created A New Trend
It no secret that one of the most prominent factors of generational poverty is the lack of education on finance. In poor communities around the United States, (predominately populated by minorities), generations of children grow up lacking the fundamental skills to properly manage their finances.
This gap in education has many root causes, (unfortunately, there are entirely too many for a single article), but ranking highest among them is systemic racism.
The pandemic hasn’t helped reduce the amount of racism in the country, nor has it narrowed the gap for obtaining a quality education for certain people. Ironically though, it has helped people learn about finances, just not in a way that anyone expected.
The pandemic caused lengthy stay-at-home orders, keeping people couped up in their houses. This in turn caused people to cope with their boredom by watching Netflix and scrolling around social media, likely much more than they normally would be otherwise.
With money running low, whether from losing a job or some other covid related reason, naturally, people began searching the internet for ways to make money.
Where do you think those searches led to?
Reddit, Twitter, YouTube, you know, the usual suspects. The difference this time though was the topics they were searching for. Sure, people have always read content about finance and how to make money online, but not like in the year 2020.
If you had done a Google Trends Keyword search in mid-2020, some of the top keywords being searched for were: Stocks, How to Make Money Online, Options, How To Day Trade, etc…
Sure, those have always been popular topics online, but last year they became very popular. Not one that, but the average age group of the people searching them was going down. I’m talking about the tail-end of Millennials and Generation-X.
To put it in terms that people my age will better understand, I’m talking about the group of people who’s more likely to spend the weekend playing COD Black Ops 3, than looking up what Fibonacci retracement levels are.
By the way, I was definitely one of those who spent weekends playing video games instead of trying to learn something new. I’m not judging.
To put into perspective how widespread this new interest in the stock market was for the younger generations in 2020, check out this quote from a Reuters article I read.
Apex Clearing, which helps facilitate trades for brokerages, said the nearly 6 million accounts it opened in 2020 represented a 137% increase from the year before. About 1 million of those belonged to Gen Z investors born in the late-1990s or younger, with an average age of 19.
Robinhood says the average age of the 13 million users on its platform is 31.
I mean, come on. How many 18 year olds did you know back in 2018 who’d rather talk about equities markets and the recent earnings report from Lowes than the no-scope 360 they uploaded to Twitch?
Yeah, me either…
Another factor, and likely the larger one, was the new trend of $0 commission trades. Robinhood is the culprit of this trend, and it’s a good thing too. The fees that the old brokerages charged were atrocious, to say the least.
Once the implication of what $0 trades really meant started to set in for the average Joe/Jill like you and me, that’s when the real change began. Suddenly, not only was it quick and easy to enter the markets, but it was also free-ish.
Yes, of course, you still needed money to fund your account, and there were still small fees for things like Options trading, but overall it really was free. That meant someone like me could open an account on my phone, deposit as little as $30, and be trading fractional shares of the big-name companies in a day or two.
I can’t speak for the rest of you, but I know personally, I would never have tried to open a brokerage account with the spare $30 I had left in the bank. I would’ve been too embarrassed to try in all honesty.
Plus, I wasn’t even sure that you could open an account with only $30.
Robinhood became so popular with their $0 commissions that it forced the hand of the older, more established brokerages to follow suit.
Well, that’s two of the three.
So far we have the pandemic and $0 commission brokers, so now let’s check out how YouTube fits into all of this.
Meet The New Age Teachers For Millions Across America
These weren’t the normal type of people you’d picture in your head when thinking about a teacher of equities and finances. They are young, around the same age as most of their “students,” and the majority of them are also self-taught.
They have been around for a while now, it’s just that in the past year they’ve been elevated to a new height because of the recent influx of new investors we already discussed.
Of course, at first, they weren’t taken seriously. Most chalking their short-term success to millennials using their stimulus checks to gamble on highly volatile penny stocks, doomed to fail as their luck ran dry.
We saw how that one turned out for them in the end though, right?
Mainstream media often labeled them as inexperienced and giving out rash and dangerous information.
That couldn’t be farther from the truth. I hate to have to limit this to only a few, but this article would turn into a 25 minute Wikipedia page if I did. Instead, I’ll list some of my favorite ones.
These are the ones who initially helped me learn about the markets. Actually, watching these three taught me much more than just stock trading, they talked about real estate, credit situations, and how to deal with them.
I even got some “unofficial” tax advice from a few videos, and guess what? It actually worked.
Remember how I said watch out for the fake gurus?
Well, I can personally attest that these three I’m about to mention are top notch. They are very knowledgeable on what they talk about and transparent with the information they show you.
Some of The Top YouTube Influencers:
- Meet Kevin, who’s a young, eccentric, self-made entrepreneur, with a sort of “rags to riches story”. He talks about Real Estate and Stocks, among other investments on his channel.
- Graham Stephen, also a millennial whose channel talks about a broad variety of financial topics like: Stocks, Mutual Funds, Credit Fixes, and Real Estate. The channel got so big that Kevin O’Leary from Shark Tank, appeared in person with Graham to critique his investments. The interview came in response to O’Leary’s reaction to an episode of Millennial Money on CNBC Make It, which Graham was the focus of. (Graham also has a second channel, The Iced Coffee Hour)
- My personal favorite, Humbled Trader, or HT, is an Asian immigrant living in Canada, whose channel discusses in great detail how to invest and trade in the stock market. She’s a very successful Day Trader but doesn’t recommend it for beginners. I found her to be the most helpful amongst the influencers when it came to the stock market.
There are many more influencers that I enjoy watching, those are a few of the most prominent. The three mentioned above aren’t just young and rich, but they are actually intelligent and know what they're talking about. When someone my age, (26 at the time I found Graham’s channel), sees another person who is similar in age talking about these topics, it tends to make them listen and want to learn.
Once you go down that rabbit hole you find that it’s very deep and contains a lot of knowledge. You’ll get stuck sometimes, watching hours of videos and reading all the material you can get your hands on.
Does this mean a person can watch a few YouTube videos then suddenly become a real estate broker or day trader? No!
Also, you have to be wary about who you’re getting this information from. With the rise of these new age teachers, came the rise of another breed. The fake gurus, promising the “get rich in 30 days bullshit courses.”
A Final Thought
There’s one thing that will determine the amount of success you have. It applies to all of us, no matter what career you choose or the path you take to achieve it.
At the end of the day, it comes down to the individual putting in the work.
All this article is intended to do is hopefully show someone that it is possible to learn how to trade stocks and invest your money successfully without the help of paid financial advisors.
Just because you didn’t attend an elite school or your family doesn’t happen to have lots of money and connections, you can still better your life with hard work and dedication.
Carve your own path.
I hope you enjoyed this article. If you did, then you should check out my new Publication.
We have many other articles about stocks and finance. In fact, we cover just about any topic that’s interesting. New album reviews from artists, both old and new, self-improvement, life hacks, etc… I think you get the point so I’ll shut up now. Thanks!
