Goodness Gracious GameStop – Following the Influencers Doesn’t Always Pay
Remember the mayhem surrounding GameStop stock (GME), various Redditor groups, and other similar stories with AMC and Silver? It feels like the GameStop mania had completely taken over the headlines, social media, and news anchors’ airtime just over a year ago. And while it can be fascinating to watch from the sidelines, our quick take reminder is this: this isn’t investment, it’s speculation.
At the end of the day, we think the GameStop mania is simply that, a mania; it’s not a reflection of evidence-based financial planning or investing in any way. And that doesn’t mean it’s not still exciting to watch or follow – like a rambunctious group winning big (then maybe losing big) at the Craps table nearby on a trip to Vegas, this kind of energy is often contagious. For some, this energy manifests itself in the form of FOMO (fear of missing out). Some wonder if they should join the game and buy in or if they’ve missed out on the path to quick riches. Others are concerned what might come of the hedge fund reactions and Robinhood’s suspension of trading for investors.
If you take a look at the ride GME has been on in this 30 day snapshot alone: it started at $17/share (which experts already believed was an overvalued price for the company), skyrocketed to a maximum intra-day price of $483/share, and is now back to about $53/share.
Whatever is to come, this short-lived hype isn’t something we think you need to be concerned about.
As you know, we fundamentally believe that grounded, evidence-based investing is about diversification, resilience in the portfolio, and a commitment to investing for the long run. Quick riches are the result of luck and good timing for some, and rarely the result of skill. Wealth is built over decades with a commitment to a sound investment philosophy based on the science.
Until the hype fades, give yourself a break from the mania with one or more of these popular pieces detailing our approach to investing.
And to any Clients experiencing FOMO, know that you do in fact own a tiny fraction of a percent of GME in your portfolio! UPDATE: as of early February 2021, Dimensional Fund Advisors was able to diversify out of GameStop in the two funds that previously held it.