Meme stocks surge in popularity due mostly to social media hype rather than company growth or performance.
Meme stocks can yield substantial profits but are volatile. The potential for loss is high.
Only allocate a small portion of your overall investments to meme stocks, and diversify your portfolio to minimize the impact of loss.
If you’ve ever heard about people trading meme stocks and making a bundle, you might wonder what they are and if this is a good investment strategy. While it’s true that some individuals have made money on meme stocks, it’s a highly speculative way of trading. More people than not will lose money by “betting” on risky meme stocks, and there are much more reliable, albeit slower, strategies to make money in the stock market.
What are meme stocks?
In a nutshell, meme stocks describe publicly traded companies that experience a surge in popularity based almost entirely on social media hype. These companies may not have increased in value because of innovation, growth or financial performance. Still, hordes of retail investors buy the stock in droves.
The sudden popularity of these stocks is driven by individuals or groups on social media aggressively hyping certain companies, making them go viral. The result is often inflated stock prices, which typically don’t have much basis in reality. Rather than buying shares in a company you believe has a good future, meme stock investors buy stocks that are merely popular by social media standards.
Expert insight
"There is a cult-like fascination with many meme stocks. Independent speculators (note, I refuse to say investors because these are not investors) get together virally and can influence the share prices of stocks that become popular ‘meme stocks.’ Meme stocks are characterized by extraordinarily high trading volumes and valuations that are in no way tethered to reality."
The term meme stock was coined after the famous 2021 GameStop short squeeze, where numerous individuals banded together on Reddit’s subforum, WallStreetBets, to buy up low-cost shares of the company in unison and drive up the stock price. This unprecedented movement led hedge fund investors shorting the stock to lose billions in the process. Since then, dozens of other companies have found themselves in a similar position with their stock.
Popular meme stocks on Reddit
Here are some examples of meme stocks and how they’ve performed over the last 12 months. These companies have experienced a boost in share prices after going viral on Reddit and other social media channels—with varying degrees of success.
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How meme stocks work
Meme stocks gain sudden and significant popularity and are characterized by dramatic price increases due to speculative trading and the bandwagon effect. The term “meme stocks” is derived from the internet phenomenon of “memes,” which are humorous images, videos or texts that spread rapidly online through social media and forums.
In most cases, the share price of a meme stock does not reflect the company’s performance. It’s all about the social media hype and numerous people jumping on board, hoping to make a pile of money quickly. But if you don’t time it right—before the stock price inevitably falls—you lose money.
Expert insight
"While those who buy early when a stock becomes a ‘meme stock’ can sell high if they time it right, this is a risky proposition. These meme stock values are unsustainable because they’re artificially inflated by the mass purchases rather than their prices being a reflection of how valuable the company itself actually is at a given time in the market."
Meme stocks may be labeled a fad by some, but it’s undeniable that they’ve significantly impacted the stock market. For good or bad, meme stocks have impacted the stock market in the following ways:
Increased volatility. Meme stocks are often subject to extreme price swings, leading to heightened market volatility. This volatility can spread to other stocks and sectors, affecting overall market stability.
Market liquidity. The surge in trading volumes for meme stocks can increase liquidity in the short term, but it may also strain the systems of brokerage firms, as seen during the GameStop surge.
Attention to retail investors. The rise of meme stocks has highlighted the influence of retail investors. Traditionally dominated by institutional players, the market is seeing a shift where individual investors have a more pronounced impact.
Scrutiny and regulation. The phenomenon has attracted the attention of regulators. There have been calls for increased oversight to ensure market fairness and transparency, particularly regarding short selling and the practices of trading platforms.
Popular meme stock terms
Besides the term “meme stock,” several other terms were coined following the GameStop phenomenon.
Apes. How those who participate in the meme stock community refer to themselves—a strong, united group that stands together against institutional investors.
Diamond hands. Being steadfast and resolute in holding onto a stock, no matter how volatile, even as it experiences significant losses.
Paper hands. The opposite of diamond hands, this term describes those who sell their stock quickly at the first sign of trouble.
To the moon. The hope or belief that a particular stock’s price will surge dramatically.
Stonks. Represents the absurdity or irrationality of stock market movements.
Tendies. Refers to the profits or gains made from meme stocks.
ATH. Stands for all-time high, which is a stock’s highest share price.
BTFD. “Buy the f***ing dip” means to buy a stock when its price is low in hopes of a turnaround.
Bagholder. Someone who holds onto a stock even after it has experienced losses so drastic that it may be worthless.
Hold the line. A statement or form of encouragement to hold onto a stock even as it experiences volatility.
FOMO. Most people already know that FOMO means “fear of missing out,” but in the meme stock community, it refers to an individual’s motivation for buying into a craze.
YOLO. Similar to FOMO, “you only live once” is basically the rationale for buying risky meme stocks.
Pros and cons of meme stocks
Many meme stocks are highly speculative and risky, but they do have their share of advantages.
Pros
Potential for rapid price appreciation. Meme stocks, by definition, have the potential to realize very high returns in a short period.
Bragging rights. It can be extremely satisfying to buy up undervalued stock before it goes mainstream—kind of like being one of the first to discover a new band.
It’s fun. Trading meme stocks is not unlike gambling; it’s exciting, and there is always the possibility of winning.
Cons
Lack of fundamental basis. A lot of meme stocks only do well because of social media hype, not because they are necessarily worth it in terms of growth potential or financial health.
Volatility. Meme stocks are notoriously volatile, with share prices falling as fast as they rise, so it’s easy to lose a lot of money.
Potential for poor diversification. If you focus on meme stocks rather than diversifying your portfolio—one of the fundamentals of smart investing—you could lose a ton of money.
What to consider before buying meme stocks
Here are a few things to consider if you’re considering putting money into current meme stocks.
Allocate a small portion of your portfolio to speculative stocks. Many financial experts recommend only allocating around five or ten percent of your overall portfolio to speculative assets.
Set realistic expectations. Think of meme stocks as gambling. Hope for the best, but expect to lose most of the time.
Do your due diligence. Research a company and review its fundamentals before buying its shares. Don’t invest solely based on social media hype.
Other investment ideas to consider
Investing in meme stocks can be volatile and speculative, so it’s wise to explore other investment options that may offer more stability and long-term growth potential for the bulk of your portfolio.
Here are some diverse investment ideas to consider:
Index funds. These are funds that track a specific index, like the S&P 500, offer broad market exposure with low fees. Examples include the Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF (SPY).
While the meme stock trading trend is fun and exciting and has the potential for big gains, it’s unreliable for achieving long-term wealth. A better investment strategy—especially if you’re planning for retirement—is to have a well-diversified portfolio to minimize risk and maximize returns. Regardless of the asset, you’ll need a brokerage account to start trading and investing.
Frequently asked questions
One example of a meme stock ETF was the Roundhill MEME ETF (MEME). However, the ETF shut down due to waning investor interest. Other ETFs that may provide some exposure to trending stocks include the Schwab Crypto Thematic ETF (STCE) and the SoFi Social 50 ETF (SFYF).
Any company that's seen its share price rise rapidly due almost entirely to social media hype—not based on real growth or financial health—is considered a meme stock. However, some solid companies get caught up in the meme stock trend.
Blackberry is considered a meme stock and experienced a surge in share price in 2021 on the heels of other famed meme stocks like GameStop and AMC. In 2024, it saw a renewed rise in stock prices alongside some other original meme stocks after Keith Gill, aka Roaring Kitty, one of the most famous meme stock proponents, posted about the company on X (formerly Twitter).
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
Lacey Stark is a freelance personal finance writer for Finder, specializing
in banking, loans, investing, estate planning, and more. She has 20
years of experience writing and editing for magazines, newspapers, and
online publications. A word nerd from childhood, Lacey officially got her
start reporting on live sporting events and moved on to cover topics
such as construction, technology, and travel before finding her niche in
personal finance. Originally from New England, she received her
bachelor’s degree from the University of Denver and completed a
postgraduate journalism program at Metropolitan State University also
in Denver. She currently lives in Chicagoland with her dog Chunk and
likes to read and play golf. See full bio
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