How Reddit and GameStop are Making Group Investing the New Regular

Cody Collins

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GameStop’s stock was a rollercoaster of emotions a month ago. From $20 to $300 in one month, Robinhood halting buying shares, and a federal hearing. It was an exciting time.

I expected it to fizzle out with no real change occurring. And for the most part, it did.

But one aspect that has stayed is short squeezing.

As you’ve probably read many times elsewhere, short squeezing is a rapid increase in the price of a stock that is heavily shorted, in an attempt to bust those who are shorting it.

A month later, we’re still in a pandemic, so people have ample free time and like always, enjoy making money. Hence community trading can still thrive.

Rocket Companies Inc

Rocket Companies is a financing company helping connect people and businesses with loans. They are best known for their Rocket Mortage, the nation’s largest mortgage lender.

Rocket’s stock ($RKT) had an eventful week. It became a popular name on Reddit’s wallstreebets page. This helped propel the stock to double from $20 to $40 in two days. After closing just under $42 on Tuesday, the stock tumbled the rest of the week, closing Friday around $25.

If you got in at $20 you could've doubled your money by selling at $40. But timing the market is hard. If you still have shares, $25 gives you a 25% gain on your investment; not a bad return.

Unfortunately for every seller, there is a buyer. So some people bought in at $40 and either sold for a big loss or, worse, are still holding.

On Tuesday I sent a text proclaiming RKT to be this week’s GME. Not to be outdone, Tanger Factory Outlet Centers Inc. ($SKT) took it a step further. CNBC’s Jim Cramer described them perfectly,

It’s today’s Rocket.

SKT had a short interest of over 30%. Early Thursday, it was up 20%, only to fall down to earth and end the day negative. Friday didn’t do it any favors as most of the market was also down.

There’s always winners and losers

Group investing is great… if you get in early or have power.

If you’re able to sway the decisions of the masses you can make a lot of money. Even if you don’t have that power you can make good money seeing what will unfold before it does. There’s a reason business schools preach about first-mover advantage.

Not everyone can win at investing. In the case of GameStop and similar stocks, someone bought in at the peak and held it while it crashed. Most of the time there’s a limited number of shares. So if you’re buying in, that means someone else is selling out.

Group investing is great because it helps people see new opportunities and learn more about investing.

But there will always be someone left holding the bag. At no point will everyone make off better than they were before.

Following the masses is a trading strategy that can work but you have to be able to spot the trend early to get in at the beginning. And know when to get out.

As easy as investing can be in the long run, there’s no get rich quick solution. That’s usually a recipe for losing money.

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