Meme stocks refer to a small number of stocks that gain sudden popularity on the internet and can reach sky-high prices and unusually high trading volume. A meme stock’s price is a result of hype on social media and not necessarily related to the company’s performance. Though there is a potential for extraordinary gains, with exceptional timing, meme investors are more likely to experience big losses as the stocks become overvalued and economic fundamentals begin to prevail.
Investing, on the other hand, is the process of buying assets, such as stocks, bonds and/or real estate, that increase in value over time and provide returns in the form of income and/or capital gains, based on improving fundamentals.
Investors should focus on the long-term opportunity and recognize that there is a world of difference between tulip bulbs and Berkshire Hathaway.
All comments and suggestions are welcome.
Walter J. Kirchberger CFA