Individual investors must exercise maximum caution in the frenzied meme stock trading that’s gripping social media, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning from deVere Group’s Nigel Green comes during a significant rise in the trading of single stock options, with the 10-day average daily trading volume at a more-than six-month high of nearly 25 million contracts, according to Trade Alert data.
It’s led by Bed, Bath & Beyond, which is about 360% this month. More seasoned meme stocks such as GameStop and AMC have been soaring too, adding 19% and 47% respectively month-to-date.
He says: “It’s like a revival of the trend that had whipped up a frenzy last year, just before things got turbulent in the wider markets.
“Back then, as is likely to happen this time around, many individual investors – often young and inexperienced – got badly burned by the experience.
“I would urge everyone to exercise maximum caution in the frenzied meme stock trading that’s being fuelled by social media and irresponsible reporting in the broader press.
“This kind of investing is extremely speculative and valuations can be expected to be incredibly wild – in both directions. There are genuine risks to people’s wealth here.”
At the peak of the meme stock frenzy last year, the deVere chief said: “I would avoid piling into stocks pumped by social media influencers.
“If you do want the thrill or novelty of chasing big gains, you really should ensure that you have a sound, diversified, long-term plan beforehand.
“There’s a major difference between investing and gambling.”
Nigel Green continues: “Piling into single stocks is the opposite of diversification, which is universally regarded as an investor’s best tool for generating and protecting long-term wealth.
“It is possible to have a forward-thinking, dynamic mindset combined with time-honored investment principles, including diversification, cash flow and profitability.”
In order to create, grow and safeguard wealth consistently to reach your long-term goals – which for most people is financial security and freedom – he says “there’s no substitute” for independent, professional, personal advice.
The deVere CEO concludes: “People investing in meme stocks are playing a financially perilous game.”