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The lasting impact of the GameStop saga

The lasting impact of the GameStop saga
Image source: Getty Images

Unless you’ve been living under a rock these past few months, you’ve probably heard at least some mention of the GameStop saga.

Investing has received a lot of good and bad attention as a result. But what lessons can we learn from these events and what will be the lasting impact for investors?

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What happened to GameStop (GME) shares?

To cut a long story short, a large group of retail traders banded together to support and buy GME shares.

It was a movement that first originated on Reddit forums. The goal was to create a short squeeze with the aim of doing two things:

  1. Costing hedge funds a lot of money (as these were the big players short selling the stock)
  2. Making retail investors money by exploiting what some called a ‘money glitch’

The whole saga saw lots of people taking sides. Some brokers even had to restrict trading on GME shares (and others).

Regardless of where you stand, there are definitely some useful lessons to take home.

How has GameStop impacted retail investors?

The public battle over these shares has shone a spotlight on retail investors, people like you and me, whose influence on the market is often minimal.

Andrew Dengate, head of marketing at Stake explains: “The conversation around GameStop has definitely supercharged the growth and helped place retail investing in the cultural mainstream. However, it forms part of a larger shift that we have been seeing since launching Stake in 2017.

“Stake gained 100,000 new customers in January and February this year. However, within that, we have seen a diverse range of customers continue to stay on top of the market with the buy and sell ratios of these stocks remaining relatively even at 1.09 for GME and 1.14 for AMC.

“UK retail investors flocking to the US market as well as the increased activity of buys and sells is something that we are seeing across the category, and it is becoming a major pain point for customers.

“We are constantly hearing from Stake customers who have switched from other ‘commission free’ brokers, including Trading 212 and Freetrade, frustrated that they are being charged an FX fee on every US buy and sell.

“Not paying a fee (be it by a traditional commission fee or an FX fee) when you buy or sell US equities is what ‘commission free’ should mean and what it does mean at Stake.”

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What lessons can we learn from GameStop?

Some people naively thought that this activity was going to lead to somewhat of a financial revolution.

In the end, nothing that dramatic has happened. But I think there are some key things we can take away from these events:

  • Ordinary investors can have a significant and positive impact on the market, but only by wielding this new influence properly.
  • Lots of people now have a better grasp of how the markets operate. This will only improve their investing skills.
  • Some investors have lost a lot of money, perhaps learning some useful lessons the hard way.
  • More discussions have opened up about the stock market and investing.

Whatever way you look at things, I think there are many positives to be taken away. Even those who lost out have likely learnt from the experience.

For those of you who didn’t get involved and knew how things would play out, it has probably reaffirmed your belief in having a steady investing strategy.

How can I invest successfully?

There is no single method of investing that guarantees you’ll make money. Part of the GameStop problem was the widespread rumours that buying these shares was a foolproof way of making gains.

Then reality struck and a lot of people were left feeling like fools. But don’t let this discourage you. Investing can be exciting and it is possible to make money. Just make sure your expectations are realistic.

It’s a good idea to avoid social media investing advice and ‘stonk’ tips. Instead, create a long-term plan. You can use a share dealing account to become a proper investor and own stock in companies that will stick around over the long run.

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