Skip to main content

The Wrong Lesson From GameStop


Newcomers rushed to open a brokerage account last month. Fuelled by the craziness of GameStop, folks jumped into the markets head first. A get-rich-quick scheme paired with a David Vs. Goliath story, this brought investing to the mainstream. Retail investors turned thousands into millions, all while hurting hedge funds in the process. Make money and tackle inequality? How could anyone resist?

Driven by emotions and momentum, this was a speculative bubble that was destined to snap back to reality (oh there goes gravity). A lot of people are now losing money and are screaming foul at the rich for rigging the game. 

A terrible first impression. Why invest when they can change the just rules? This is the wrong lesson.

Does the stock market favour the rich? Yes. They have faster computers and better information. But if you put down your broad brush you'll see the stock market is a great way for everyone to build wealth.

Pros might have advantages but they don't have complete control. If they did, they would perform better. Instead, they by and large underperform the market. 

We have one key advantage. We can play the long game. Hedge funds need to show results every quarter, we don't. They need to take outsized risks and trade excessively to prove their worth, not us. 

Despite the current narrative, investing has never been more democratized. It's practically free to get our fair share of market returns with index funds.

If you lost money it's not because investing is broken. You weren't investing. You were gambling. 

This wasn't rich vs poor, it was early vs. late. A game of musical chairs where there was a million players to each seat. Don't get fooled - not by the rich, not by folks on Reddit. None of them care about your financial goals. 

If you truly want to grow your wealth and not play into a losing game - keep your fees low, trade less and invest for the long term. Don't lose faith in the stock market because of this, it'll only cost you more.



Comments

Popular posts from this blog

Today's Special: Humble Pie

You champion a project, fight for an idea, and then...reality sets in. That churning in your stomach isn't butterflies, it's the realization you've missed the mark.  Pride will puff up your chest, and kick in the "defend at all costs" instinct. But arguing with the umpire never changed a call. Admitting you're wrong isn't a sign of weakness. It can strengthen your professional standing. In a world obsessed with the illusion of infallibility, the courage to adjust course is a breath of fresh air. It shows you're confident enough to be wrong, and adaptable enough to learn from it. Do your research, think critically, and stand behind your decisions. But when the data whispers (or screams) otherwise, don't be afraid to swallow that slice of humble pie. Be the first to acknowledge. Don't wait for someone to point out your mistake. Be open, take responsibility, and most importantly, focus on what you're going to do to address it. Don't dwell ...

Negative Feedback, Positive Lessons

In the battle against plastic bags, a five-cent tax was shown to be much more successful at deterring usage than a five-cent credit for bringing your own bags. Carrots satisfy but sticks sting, and they sting hard. So we default to the less painful choice of avoiding loss. Loss aversion impacts the way we process information. A 2019 study  invited participants to learn through a series of multiple choice questions. Each question only had two options to choose from. Whether guessing correctly or not, they would still learn the right answer.  Despite the identical learning opportunity, participants were much more successful at recalling the answers they guessed correctly than those they got wrong.  "You're right!" feels good. We savour the moment, analyzing every detail.  "You're wrong!" stings. We want to quickly forget, dismiss, and move on.  When we succumb to loss aversion, we miss opportunities to learn. Failure is part of the process. We'll experie...

Starting Really Really Small

On your desk is one of the most intimidating sights known to man. A blank page. The prospect of filling it up with anything resembling decent seems insurmountable. Staring at the long road ahead fills you with anxiety and dread.  The first step is the most difficult. So we procrastinate. We " research ", we " prep ", we " plan ". We do everything except tackling the problem. We avoid the pain for as long as we can.  To make a blank page less intimidating. Tear it in half. There, half as scary, twice as easy. Still too much? Do it again. And again. Keep doing it until the task is so small that it's too easy not to do.  Getting starting is the hardest part. So make the hardest part as easy as possible. This doesn't guarantee amazing results, but it gets you in the game. You can't win if you don't play.