I Took Investment Advice from Strangers on Reddit
By: Jon Peters
Tags: Investing, Personal Finance, Finance, Advice, Money

www.reddit.com/r/wallstreetbets

I Took Investment Advice from Strangers on Reddit

Is there money to be made from meme stocks?

When the coronavirus pandemic struck at the beginning of this year, the global economy ground to a halt. Amidst the uncertainty, investors fled the stock market, and the Dow Jones Industrial Average dropped 8,000 points between February 12th, 2020 and March 11th, 2020.

Since then, the stock market has been on an absolute tear, with the S&P 500 completely erasing the losses from earlier in the year, and is now at an all-time high, returning +15% this year. And while a +15% return is nothing to turn your nose up at, it’s the individual stocks that have generated the greatest returns for investors this year, such as:

Tesla — increased by 579% year to date

Peloton — increased by 303% year to date

Etsy — increased by 224% year to date

These are just a handful of companies that have provided outstanding returns this year, the list goes on. And on, and on, and on.

Warren Buffett, meet r/wallstreetbets

A few weeks before the stock market crashed, I was in the process of transferring my old workplace pensions into a single account, one that was easily accessible. This gave me a moderate amount of money to invest.

I began to read as much as I could about investing. Whether on Marketwatch, Business Insider, or the Wall Street Journal, I absorbed as much information as I could about investing in stocks. Shortly afterwards, I discovered r/wallstreetbets.

WallStreetBets is one of the most interesting communities you’ll find on Reddit. Described as a subreddit for “people who want to make money and be amused while doing it,” most of the posts you’ll find will contain memes, rocket emojis, with perhaps a shred of information regarding a particular stock. Many in the community admit to knowing nothing about the companies they’ve poured money into and that they’re merely following the ‘hype’ — putting money into whichever stock is being discussed the most.

Posting “gain porn” or “loss porn” is highly encouraged, in fact, the only thing that the community seems to love more than someone making a boatload of money is to watch someone lose everything.

Screenshot by the author

Coming out of a risky trade with a huge loss is considered a badge of honour — but if you didn’t end up losing 100% of your portfolio, then being branded a “weak-handed p*ssy” is probably the nicest thing you’ll be called.

It’s a very bizarre place, and not for the faint-hearted or easily offended.

My Reddit Experiment

Considering some of the amazing returns I’ve seen on the page, I decided to conduct an experiment. I designated a small portion of my portfolio as my “f*ck it fund,” — money that I didn’t care if I completely lost, and decided to keep a close eye on the page for a few weeks, specifically looking for the stocks that were being talked about most frequently.

It wasn’t long before I had two contenders: NIO and PLTR. I hadn’t the faintest idea what either of these two companies did, I just knew that the WallStreetBets community was frothing at the mouth over them, that they were expected to “go to the moon.” For the uninitiated, the phrase “go to the moon” refers to a stock’s share price increasing drastically and is usually accompanied by one or more rocket emojis.

Rest assured, both had more than their fair share of rocket emojis, so I decided to divide my money between them, making the following purchases:

I purchased PLTR on November 9th, at $15.27 per share (including charges)

I purchased NIO on November 10th, at $42.74 per share (including charges)

So, what were the results?

Three weeks on and I’m not a millionaire just yet, but I’m relatively pleased:

PLTR enjoyed a magnificent run, peaking at around $33 per share, more than twice the price I originally paid . As the stock dipped slightly I sold my initial investment, to prevent any losses, but still hold a number of shares. At the time of writing, PLTR is trading at around $24 per share.

more than . As the stock dipped slightly I sold my initial investment, to prevent any losses, but still hold a number of shares. At the time of writing, PLTR is trading at around $24 per share. NIO continued to rise after my purchase, peaking at $55 per share, a rise of around 30% from my initial investment. Since then the stock has dipped slightly, but I am still in the green. At the time of writing, NIO is trading at around $46 per share.

It is certainly possible to make money following the ‘meme’ stocks that you’ll find being pushed by random strangers on the internet. Both stocks increased in price at a rate substantially higher than the 8% you can expect annually from the S&P 500.

However.

Buying into ‘meme’ stocks is not investing. It’s gambling, and it should be treated as such. I make no claims of having superior trading skill or knowledge. I bought stocks that I knew nothing about because I was curious as to what could be achieved by following the hype.

Making money this way felt deceptively easy. But though I seem to have had quite good fortune, I could just as easily have lost everything. In fact, in the days since PLTR peaked, posts have popped up all over Reddit from angry individuals who bought in at $33 per share, only to then watch the value of their investment fall by a third over the coming days.

Can you make money by following advice from internet strangers? Yes.

Could you just as easily lose everything? Also, yes.

Would I recommend you try it? Absolutely not.

The contents of this article do not constitute investment advice.