Tuesday , 21 May 2024

What Is a “Meme” Stock? How Well Have Meme Stocks Done?

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An original article by Lorimer Wilson, the Founder and Managing Editor of munKNEE.com – a site for sore eyes and inquisitive minds and your Key to making money which was first posted on TalkMarkets.com under the title Which Is The Better Choice? Investing In A Meme ETF Or An AI ETF? with 917 pageviews to date.

What Is A “Meme” Stock?

The word “meme” comes from the ancient Greek word “mimema” – meaning imitation – and is used to describe information that is imitated and often spread via pop culture references on social media. Simply put, a meme stock is a shared investing idea imitated by other investors.

How Did the Meme Stock Movement Start?

According to an article in The Motley Fool (see here),

“Keith Gill started sharing his views about GameStop stock on Twitter, YouTube, and the subreddit r/wallstreetbets in 2019, explaining why a combination of high short interest from short sellers (firms that bet against a company) and an undervalued and underappreciated GameStop business could lead to huge gains. Add in a pandemic, a surge in new investors who grew up online, and the ease of stock trading on new apps such as Robinhood Markets (HOOD), and all the right ingredients came together to create a viral meme stock movement.”

What Are the Pros and Cons of Meme Stocks?

Because a surge in buying activity can send a stock price soaring, there are some benefits to owning meme stocks (and potential meme stocks before they rocket higher), namely:

  • a chance for very high returns in a short period and
  • an ownership stake in a new investment idea before the rest of the market gets wind of it.

However, as with other highly volatile investments, there are drawbacks to betting on meme stocks because:

  • stock price moves are unpredictable with returns often suddenly reversing course when a company loses its luster among individual investors.

Which is the Better Choice? A Meme ETF Or AI ETF? 

  • The 91 AI stocks in the Global X Artificial Intelligence & Technology ETF (AIQ) have gone up 31% since the end of October, 2023 despite the tremendous attention being given to the AI sector (see here) while, in comparison, the 75 stocks in the VanEck Social Sentiment ETF (BUZZ) have gone UP 44.4% since the end of October, 2023.

Conclusion

Hands down, the better investment choice between a meme ETF and an AI ETF is a meme ETF.

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