A report by Openmarkets Group (OMG), an Australian trading and wealth management fintech, has found that millennials are getting outperformed when it comes to meme stock investing.
The concept of meme stocks was the result of the viralization of Gamestop (GME) and AMC Entertainment (AMC) during the Gamestop short squeeze of 2021. This event, which would become one of the most significant short squeezes in the history of Wall Street, was the result of cooperation between members of a Reddit community known as “WallStreetBets”. This community, which is mostly composed of Millenials, describes itself as “ Like 4chan found a Bloomberg terminal.
Since then, new meme stocks have emerged as the subreddit and other online communities continue to viralize them, drawing attention from other retail investors. What started as a financial revolution by the younger generations looking to take control of their financial freedom might now be having the opposite effect for them.
According to data analyzed by OMG, the younger investors are accepting more risks when investing in these stocks while also receiving lower returns, even losing money on average. The reports compared trading data from the boomer, gen-x, and millennials generations, finding that the first 2 are making more money when compared to the latter.
A total of 11 meme stocks had their prices analyzed over the past year, with researchers dividing the data between two groups: Investors over and under 40 years old. The results were ironic but not surprising: The average return for those over 40 was 1.29% and -1.93% for those under.
This suggests that younger traders are accepting more than 2 times the risk while also seeing returns 2.5 lower than their counterparts. This is not necessarily surprising when considering that most of those investing in meme stocks have little or no experience trading, choosing to invest in them due to the “hype” created by social media. Ivan Tchourilov, CEO of OMG, said about these results:
“With all the hype around meme stocks, it is no surprise that the younger traders and investors are getting caught up and caught out. And considering we are seeing the largest intergenerational transfer of wealth in history, this is a very worrying trend. We would advise caution, and for investors to research, seek professional advice, and gain experience before trying to time the market or make quick gains, especially in meme stocks.”
OMG’s research is the result of its mission to facilitate access to wealth creation not only via its online retail trading platform but also by connecting its users with advice. While the new generation of trading platforms have focused on opening markets to a new audience, they usually don’t help inexperienced traders to navigate the nuances of stock trading. The trading and wealth management fintech is looking to set itself apart by not only opening the market but also empowering traders.