Gen Z was “awakened” to investing amid the meme-stock mania this year, and now they’re turning to social media for advice.
A new report from Fidelity showed more than half of Gen Z-aged people surveyed made a trade in the first three months of 2021 when the meme-stock craze took hold, with GameStop leading the way. Now, the generation of young adults aged 18-24 is wanting to educate themselves, and they’re turning to social media sites like TikTok and Instagram for help.
About 41% of Gen-Z investors use social media to educate themselves on investing, the survey showed. That’s more than their older counterparts, with 38% of Millennials and 25% of Generation X using the platforms for advice.
Kelly Lannan, Fidelity’s vice president of young investors, said social media is the most likely place Gen-Z investors turn to first when seeking advice. After that, they most likely seek advice from people close to them before going to financial services platforms.
“Good or bad people are still turning to social media,” Lannan told Insider in an interview.
Whether it’s TikTok, YouTube, or Instagram, “We want to be there, so we can make sure that we are doing our part in ensuring that Gen Z is getting the right information, and they’re not just listening to someone who wants to be famous on these platforms,” she said.
Nearly half of Gen Zs surveyed said they’re feeling more educated to motivate themselves on trading and investing. “That’s a really good thing if people are starting to ask questions and engage more with their finances,” Lannan said.
For young investors, stocks are the most popular, with growth and dividend stocks being the most popular, and meme stocks closer to the bottom of the pool, according to a recent survey from the Motley Fool.
Even so, many Gen Zs started learning more about the stock market when an army of retail traders mobilized on Reddit’s Wall Street Bets poured into GameStop along with other so-called meme stocks to drive a short squeeze. About 58% of the young group said it was “more excited” to learn about the stock market following the meme-stock market volatility, the survey showed.
Retail traders, which make up about 80% of the stock’s investor base, hyped up the company on social media sites like Twitter and Reddit to help drive last week’s rally. They rallied around AMC again Monday with the word “short” frequently mentioned with posts about the stock, HypeEquity data showed.
AMC might be close to a short squeeze – meaning those betting against the stock may have to cover their positions – Forbes reported, citing S3 Partners’ Ihor Dusaniwsky, who said the company’s recent rally has put it into “short squeeze territory.” MarketBeat data show the stock has a 21% short interest rate, in line with that of GameStop, the original meme stock.
AMC executives benefited from last week’s gains with six of them cashing in on the stock gains, according to Friday filings with the Securities and Exchange Commission. In total, the executives sold 150,000 shares and made more than $8 million.
Hedge-fund Mudrick Capital also cashed in on millions of shares last week after just announcing it had purchased the stock. It said AMC was overvalued.
The company also offered millions of new shares, and its Chief Executive Officer Adam Aron hopes to offer even more. The CEO, who has catered to his large base of retail traders, went on a popular YouTube channel last week to make a case for selling more stock.
The retail traders driving the meme stock frenzy are “here to stay,” but the current rally in shares of AMC Entertainment is not, said Karl Roessner, the former chief executive officer of E*Trade, in an interview with CNBC.
“This is not going to end well,” Roessner said of the AMC rally. “I think historically we we’ve seen this in the past, but I do believe this group has staying power.”
Shares of AMC jumped as much as 27% Monday following a record week in the stock that was largely driven by retail traders on Twitter and Reddit.
AMC, the world’s largest movie theater chain operator, became part of a new trend of so-called “meme stocks” earlier this year when retail investors on Reddit threads, most notably Wall Street Bets, began pouring into certain stocks like GameStop in order to squeeze short sellers.
Wall Street Bets since has ballooned into an army of retail traders numbering more than 10 million users.
In the interview with CNBC, Roessner, who is now the CEO of Lefteris Acquisition Corp., said with the availability of social media and trading platforms, the group has “powerful tools” at their fingertips, giving them “staying power.” Apps like Robinhood, WeBull, and Public, have grown in size amid interest from new investors.
He said his own sons, who both have E*Trade accounts, have picked up on investing.
“They keep hitting me as to, ‘Why don’t we own any dogecoin, or why don’t we get involved with one of these meme stocks?’ And I always bring it back to fundamentals,” he told CNBC. “Then they hear from their friends that they just made $10,000 on dogecoin, and they’re going to take the rest of the summer off. So how do you combat that?”
He said educating in financial literacy is key. For example, all of the money retail traders are investing in hyped up stocks should be risk capital, he said, because there’s a chance a person could “lose everything.”
“I always worry about the last retail trader who’s left holding the bag when the music stops,” he said, noting the last retail traders to invest during the internet bubble or before the market crash that prompted the Great Recession.
With regard to AMC specifically, Roessner said he applauds management raising capital to address balance sheet problems. But overall, “Absent some serious strategic undertakings by that company, it’s still just not worth what it’s trading for right now.”
If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at email@example.com.
Some have said the app makes investing too much like a game, as others complained of market manipulation amid the GameStop frenzy.
The situation has allowed competitors to muscle in.
WeBull, the Chinese-owned brokerage that launched in 2017, said it saw a 16-fold jump in new account signups following the Robinhood backlash, Bloomberg reported at the time. Meanwhile, Public, which also launched in 2017, has doubled in size year-to-date with more than 1 million users.
These trading apps are all competing for attention from Millennial and Gen Z investors alongside more established brokerages, like TD Ameritrade, Fidelity, and others.
For this story, I downloaded each of the three apps to compare the user interface, the variety of features, security, and the educational resources, to see which one came out on top.
The bottom line? Robinhood was hands down the most enjoyable to use and interact with, but WeBull came out on top with readily available data and resources to help me improve my investing strategies.
My view as a first-time retail investor
I will start by saying I’ve never done this before. I started my professional journalism career at Bloomberg and am now the Millennial Investing reporter on the markets team at Insider. Those roles come with strict rules on what I can and can’t do in terms of investing.
For example, I write a lot about meme stocks like GameStop and AMC. If I were to invest in one, that would be a conflict of interest and would land me in hot water with my employer. Besides contributing to a 401(k), I’ve stayed away from any other investing.
To open accounts with each of the apps, I had to answer a lengthy list of questions, from my investment experience to a lot of personal identifying information, and then input my banking information. This experience is standard across all services.
Though I did not claim the offer, all of the apps I tested award users one free stock as a perk of signing up.
Also, importantly, all of these services are commission-free. This is the case for both stocks and crypto on Robinhood and WeBull, while Public does not offer crypto trading at this time.
I see why Robinhood has been described as “gamifying” investing. The app is well-designed and exciting.
My retail investing journey began with Robinhood. I got the go-ahead to transfer exactly $1 to my new brokerage account to invest in an exchange-traded fund. I chose the Vanguard S&P 500 ETF, which trades under the ticker VOO.
With $1 in buying power, I received .002602 shares, the app said. I swiped up to submit the purchase. It said my order was completed and showed me a summary.
When I clicked “Done,” a full-screen graphic appeared saying, “Congrats on making your first trade, Natasha!”
As someone who writes about markets for a living, this was extremely fun. If I’d had more than $1, I would have clicked the shiny green button on the bottom that read, “Continue your journey” to buy more.
I started to understand how young people could become addicted to an investing app.
Public made the buying experience just as easy. Instead of the bright white-and-green color scheme on Robinhood, Public has a sleek black-blue-and-white design.
I easily found the Vanguard ETF, input my $1 of buying power, and clicked “confirm.” No confetti, but it was straightforward and easy.
WeBull was more of a challenge. I transferred my $1 from my bank account only to discover the app doesn’t offer fractional trading, meaning I had to buy a whole share, which would have cost $386.91 as of 2:45 p.m. on Friday.
The discovery was a let down. I would either have to find an ETF trading at $1, which does not exist, or transfer more money for something more expensive.
I decided on a single share of the Financial Select Sector SPDR ETF, trading under the ticker symbol XLF, for $37.54.
After transferring more funds, I hit the blue “trade” button on the ETF’s main page, input the quantity as 1, and hit “confirm.” It brought up a receipt page that read “working” and would allow me to cancel or modify my order in the meantime. Again no fireworks, but a relatively simple process.
WeBull has everything a young investor would need – except fractional trading and a fun user interface
If you overlook the lack of fractional trading, which can be a great way for investors to own otherwise prohibitively expensive stocks, WeBull felt like the most serious investing app. Here’s why.
First of all, it had the most security features. I opted to set an unlock pattern for each time I open the app. On top of that, when I decide to go into my brokerage account within the app, I have to enter a six-digit pin.
It felt like bank-level security, which is something I found important out of a broker that has all of my personal information and bank account details.
Robinhood and Public have security features, too, just not as many. Robinhood requires my phone passcode each time I open the app. On Public, I opted to turn on the face-ID feature for more security.
WeBull also provided the most market data.
Though the deluge of data meant the app wasn’t as sleek as Robinhood, it also meant I had more access to important information before investing.
That’s not to say Robinhood and Public don’t have market data. They do (on Robinhood investors can pay $5 for a subscription to market research and level 2 data), but neither app has near the amount of information WeBull provides up front.
In terms of educating young or new investors, WeBull also wins. The app regularly sent me messages with how-tos on investing and explainers on topics like initial public offerings.
There wasn’t much for educational resources within the Robinhood app. Public offered some. All three gave access to relevant news articles.
WeBull also had a social media feature, where users can share their views and investments.
Public, though, has a much more visible social aspect, and markets that as a selling point. Its slogan is “Public makes the stock market social,” and it recently launched a live audio feature, similar to that of the Clubhouse app.
Among the apps, investors have to choose among a sleek and exciting platform with Robinhood, a less sleek yet more informational app in WeBull, or a social-media driven platform in Public.
Overall, my experience would lead me to choose WeBull if I was in the market for a trading and investment platform.
As of Friday, AMC has been on a five-day hot streak amid hype from retail traders on Twitter and Reddit, causing the stock price to triple since the beginning of the week. The shares reached a high of $36.35 Friday. Short sellers have taken a major hit.
On Twitter, the hashtags #AMCSTRONG, #AMC500K, and #AMCAPES have been trending. Meanwhile, on Reddit’s Wall Street Bets forum, AMC was the most talked-about stock, according to HypeEquity data. Retail traders posted familiar phrases like “diamond hands” and “to the moon” in reference to the stock’s continued rally.
AMC stock gains have caused major losses for short sellers with short interest in the stock at 21%, according to MarketBeat data.
With Thursday’s rally alone, AMC shorts lost more than half a billion dollars, data from market research and data firm ORTEX revealed.
Meme stocks, popularized by retail traders on Wall Street Bets, rallied broadly this week, with gains in GameStop, Virgin Galactic, BlackBerry. and relative new favorite, Beyond Meat, all rising.
The meme stock rally this week has left short sellers with $2.76 billion in losses from GameStop, AMC and Virgin Galactic, ORTEX said.
The rally in AMC shares began early in the week when the company’s once largest shareholder, private Chinese conglomerate Dalian Wanda Group, sold nearly all of the rest of its stake. Redditors cheered the newly available shares, saying the company was now theirs.
Bloomberg reported that the share rally might help AMC pay off its $10 billion in debt, as investors suggest the theater chain should sell more shares to pay down or refinance.
Cryptocurrency is taking over Reddit threads, and meme stocks are going to the back burner, according to figures from market data firm Quiver Quantitative.
The data, shared with Insider, found comment volumes on the r/CryptoCurrency subreddit jumped 82% this month, while the number of comments on r/WallStreetBets sunk 25%.
In further contrast, on Friday the cryptocurrency forum had about 36,000 daily comments, while Wall Street Bets had just 13,000.
Cryptocurrencies went on a wild ride last week as a multi-day selloff caused the price of ether and bitcoin to plummet, along with altcoins such as Dogecoin. The selloff stretched into the weekend, but on Monday and Tuesday, the price of bitcoin began to recover.
The number of comments in r/CryptoCurrency hit the highest point in the month last week with 59,000 in just one day.
Though Wall Street Bets came into the spotlight earlier this year amid the GameStop frenzy and ballooned to more than 10 million followers, the forum forbids users from discussing cryptocurrency. The guidelines say, “No Pump & Dump, Crypto Discussions, Schemes or Scams.”
The cryptocurrency thread, however, says it’s the “leading community” for discussion, news, and analysis on the topic, with nearly 3 million members.
Retail traders, known to flock to Reddit to discuss markets, want to invest “in a narrative,” Quiver Quantitative founder James Kardatzke told the Financial Times, adding that, “crypto is having a lot of volatility and more interesting storylines,” than meme stocks like GameStop and AMC Entertainment, currently.
In a May 24 note, JPMorgan analysts said “more financially vulnerable demographic groups,” like millennials and younger, “have larger relative exposure” to the crypto market. The analysts cited a statistic from 2019 which showed the group owned about a third of the $1.6 trillion market at the time.
An April survey of 1,400 investors aged 18 to 40 from the Motley Fool found 47% of Gen Zers and 39% of millennials own cryptocurrency, making it the third most popular type of investment after stocks and mutual funds.
That’s significantly lower than at the height of GameStop mania, but still 55% higher than in February 2020.
Of course, retail investing is about a lot more than Robinhood.
There’s now a rich ecosystem of apps fulfilling a wide spectrum of niches. There are other mobile-first trading apps like Stash and WeBull, investment social networks like Public and Alinea, women-centric services like Ellevest, and so on.
The consumerization of investing has only just gotten started. And that’s a good thing.
The fact remains that retail investing is an immensely powerful tool for individuals to take control over their wealth. Millennials in particular are still woefully under-invested, relative to previous generations – just 3% of equities are owned by people born between 1981 and 1996.
People who choose to use Robinhood and apps like it are challenging the status quo and writing their own rules of what investing is all about.
Hype is not always irrational
Traditional investors like Warren Buffet warn against acquiring assets based on speculation and hype; they preach the gospel of “fundamentals.”
But hype is not always irrational; you can make a strong argument that it’s another indicator of perceived value. Do you know what other assets are based on perceived value? The money in your wallet.
As we watch our government lift our economy out of a recession simply by printing more money, it’s reasonable to ask, how much will fundamentals drive our economy moving forward?
At this point, we really have no idea.
Retail investors are saying, ‘We get to have a voice in determining what is and isn’t valuable.’ And as the recent surge of interest in non-fungible tokens (NFTs) has shown, investing is about a lot more than just stocks and bonds.
Buying fractional shares in trading cards (Mythic Markets), fine wine (Vinovest), collectibles (Rally, Otis), and other lifestyle assets are all reasonable options for investment.
Investing is not always about retirement
Millennials invest for different reasons than their parents did. They’re not necessarily looking to earn enough money to retire to an island in the Bahamas. Many invest in order to live more fully now. For this generation, retail investment is just as much about experience, entertainment, and education.
Research has shown us that millennials value experiences over material goods. They’d rather backpack across the Andes than buy a yacht. Playing the market in a gamified way fits into this desire for new experiences. Like it or not, investing has become another form of entertainment.
More important, most people in my generation have very little practical experience in investing. As of 2019, only 37% of affluent millennials said they felt knowledgeable about investing; more than 40% owned no stock at all.
I certainly wouldn’t recommend anyone bet their life savings on Tesla stock or convert their 401K to Dogecoin. Stock prices fluctuate over time; cryptocurrency is notoriously volatile.
But if people have the discretionary income to experiment and educate themselves about equities and cryptocurrencies, now is as good a time to start as any.
Investment apps are a solid investment
Robinhood changed how people invest and, as a result, how financial institutions respond to their customers. Some of the innovations it introduced – like commission-free trading, the ability to buy fractional shares, and its mobile-first mentality – are now table stakes for any new investment app that comes along.
Now the company is trying to change the rules again. Since the GameStop controversy, the company has been lobbying folks on Capitol Hill to advocate for real-time settlement. This would alter regulations about how much cash trading apps like Robinhood must keep on hand during settlement – the rules that led the company to suspend trading back in January.
I’m confident Robinhood will continue to challenge the norms of traditional investment, and that the company’s IPO later this year won’t be impacted negatively by the bad press it has received.
At Lightspeed Venture Partners, we’re bullish on the potential of retail investment apps. Just as apps like G-Suite, Rippling, and Gusto have made it much easier to start a small business and onboard employees, technology platforms like Alpaca and Galileo are making it easier for entrepreneurs to launch new investment startups.
Investing is going to become a much greater part of everyone’s consumer and entertainment experiences. People who’ve been reluctant or unable to invest in the past, such as women and people of color, will continue to participate in much greater numbers.
You can bet on it.
Mercedes Bent is a Partner at Lightspeed Venture Partners and focuses on consumer, fintech, edtech investments.
One millennial investor vowed to “never again” miss out on gains from hyped-up cryptocurrencies. One $500 investment later, he’s now the proud owner of 20 billion units of Australian Safe Shepherd, also known as ASS coin, Bloomberg reported.
The article described him as a “thrill-seeking amateur, goaded on by social media.” Social media platforms have become a key part of the boom in retail trading, as a recent survey showed one in five investors has used Reddit to help them make an investment decision.
Hackney, a former bar tender from Tampa, Florida, said he was part of the GameStop craze earlier this year in which an army of Reddit retail traders caused the stock to skyrocket, squeezing short sellers. As for his investment in the stock, he told Bloomberg he “was up and then, in a blink, he wasn’t.”
He invested in dogecoin, at one point, too. Dogecoin, which twisted and turned this past week amid broader market volatility, started as a social media joke about a popular meme and has since turned into a well-known altcoin.
In January, Hackney bought dogecoin at 4 cents, and the currency immediately doubled. But he couldn’t stand the wild price swings and sold his position, only to see it rocket to 70 cents earlier this month.
At that point, he vowed to never let that happen to him again, Bloomberg wrote. That’s when he put $500 into ASS coin.
Altcoins have taken hold of retail investors recently. Instead of the well-known bitcoin, many are investing in alternatives like dogecoin, litecoin, and safemoon, among others.
Earlier this week, Barstool sports founder Dave Portnoy, calling the alternatives “sh*tcoins,” invested $40,000 in Safemoon, which launched in March.
Cryptocurrency linked-stocks plummeted this week amid massive sell-offs in bitcoin and ethereum. Analysts have warned against investing in alternative cryptocurrencies, though, saying the social-media driven coins are unregulated and highly volatile.
Investors betting against GameStop and AMC Entertainment shares have lost nearly $1 billion in the last five trading days alone, new figures from ORTEX show.
According to the data, GameStop and AMC short-sellers lost $930 million on their positions over the last five days of trading as both stocks rallied. Monday alone, AMC shorts lost $210 million and GameStop shorts lost $227 million.
Short positions in the stocks remains high, which causes “large losses” for anyone with a short position, ORTEX co-founder Peter Hillerberg told Insider in an email. AMC short interest is at 18.3% of free float and GameStop short interest is at 21.8%, according to ORTEX.
“The sharp price increase can cause short position holders to try to close their positions by buying back the shares, causing additional demand which in turn can cause the share price to go up further,” Hillerberg said.
“This is what the ‘Reddit army’ is hoping for,” he said.
Shares of both companies fell Tuesday, according to Investing.com data.
Before that, AMC was on a multi-day rally after Redditors on Wall Street Bets and other subreddit groups pushed for a short squeeze in the meme stock. On Twitter Monday, the phrase #SqueezeAMC was trending. That trend, Hillerberg said, indicates, “this is a large and very vocal community.”
Adam Aron, CEO of AMC – the world’s largest cinema chain operator – thanked Reddit and Robinhood traders on an earnings call earlier this month for boosting the stock. So far this year, shares have rallied roughly 500%.
The popular trend of meme stocks began with GameStop, though. In January, an army of Reddit day traders pushed the shares to rally from single to triple digits in an effort to squeeze short sellers.
Shares hit their lowest in a month on May 11, sinking to $136.50, and have since rallied, trading at around $175 Tuesday.
The company nodded at Redditors last week in a tweet that was later deleted in which an astronaut sat on the moon, a likely reference to a popular Reddit phrase about the stock price going “to the moon.”
Amid the months-long saga, GameStop has seen a management shakeup, with activist investor Ryan Cohen joining the board and CEO George Sherman announcing his departure. The company has also strengthened its balance sheet, eliminating $216 million in debt.
Cryptocurrencies are all the rage right now, thanks to the likes of Tesla boss Elon Musk hyping up dogecoin, or some of the world’s most respected financial institutions making bitcoin available to their clients, right down to youngsters on social media snapping up digital coins for pennies and then paying for college.
The value of most digital tokens has gone through the roof. Search volumes for “crypto” on Google outpace those for “stocks” by a ratio of 5 to 1 right now. Everyone wants in and to “HODL” – slang in the crypto community for “hold on for dear life”, or hang on to your bitcoin, no matter how crazy the price goes.
And at the very forefront of the charge into crypto are millennial investors. In the US alone, two out of three millennials say they believe it’s becoming a more attractive asset class. And why not? To many, it looks like quick, easy money and it’s the polar opposite of their parents’ definition of “finance.”
More time to secure returns, low-effort investing, the novelty value, detaching from traditional financial systems and the temptation of high rewards are some of the reasons some of the young investors we spoke to gave as to why they love cryptocurrencies.
Mastercard’s New Payment Index showed earlier this month 40% of those surveyed said they would use crypto in the next 12 months. Specifically though, 67% of millennials said crypto had become a more attractive investment option since its boom began, and 75% of this age group said they wanted to learn more about the asset class.
Millennials are largely understood to be people born between 1980 and 1994, many of whom are gradually inheriting their baby-boomer parents’ wealth and pretty much all of whom have grown up in the digital age.
“After many half-drunk conversations with [a friend], we finally saw “the light” that was DeFi… The idea of being an early adopter, even with all the hype, was a little scary but also very exciting.” Jon Amar, CEO of public relations technology startup Vetted, told Insider in an interview.
But it was not just the novelty that attracted Amar into the crypto-sphere. “I can’t go to a store and buy a good or service with gold. I can, however, do that in certain places with crypto. This was a big determining factor for me, as it legitimized crypto as a viable alternative asset.” he said.
Melissa Lewis, a young investor who uses Binance to trade cryptocurrencies told Insider one of the reasons she likes crypto investing is its ease. “With crypto, you can buy it and forget about it for a couple days and then when I check it, it’s increased,” Lewis told Insider.
“Crypto has had a steady and stable increase, whereas my stocks are constantly going up and down,” she continued.
Others echoed this sentiment: “I also see a more visible path to making profits in this market versus the equity and bond market,” investor Mitchell Yousem said.
This long-term nature of crypto investments is one of the main reasons why millennials are the driving force behind the boom, rather than older investors, eToro crypto market analyst Simon Peters told Insider.
“With millennial investors compared to the older generation, time is on our side and we can afford to hold these investments for 20, 30, 40 years in certain cases and see what happens, where older generations don’t have the luxury of time,” he said.
But Peters also believes many are first tempted by the thrill that crypto’s volatility brings.
And these tokens are certainly volatile. The most widely traded, bitcoin, has risen by 78% so far this year alone, having hit record highs around $64,000 just one month ago. But this pales in comparison with the price action in some of the alternative tokens. Meme crypto dogecoin has gained 12,000% this year, while Cardano’s ADA token has risen almost 1,000%. But even that seems small fry compared with tiny, hyper-volatile tokens that can gain 1,000% in 24 hours.
“Whilst people may have gotten in initially purely because of the volatility and the price action, once they’ve actually gone and actually understood the technology, what it’s about, what crypto’s trying to do essentially that’s when more of an interest may develop as well, eToro’s Peters said.
It’s not just about convenience and money. Crypto, unlike traditional investment approaches, offers transparency Yousem said.
“I think many of the younger generation have a great deal of skepticism towards banking institutions, and investing in and choosing to use alternative forms of currency is one way to vocalize this view,” he said.
Based on Peter’s experiences at online broker eToro, he believes this plays a role on top of the money-making potential. “I think with the younger generation as well there’s perhaps over time been a bit of a disengagement with governments and central authorities and the whole, I suppose, ethos of crypto is to be decentralized.”