Social media community challenges investing norms

Written by on January 29, 2021

Social media community challenges investing norms

By Ben Stemrich

January 29, 2021

Marketplace.org

Online investors linked through the Reddit website are turning the U.S. Stock Market upside down. The moves are designed to pump up the price of certain stocks to defy traditional investors. 

Listen to the story.

The social media network Reddit is like a bulletin board for like minded individuals, in this case investors.

Gene Dickison is a financial advisor who hosts the show More Than Money on PBS39. He says the Reddit investors are going to war with institutional investors who short sell stocks. 

“Shorting is when you expect the stock to go down so you end up selling a stock for its current value planning on rebuying it when it has dropped,” Dickison says.

Reddit investors are driving up the price  on certain stocks, so when hedge funds sell, it will likely be at a loss.

Dickison says the practice is legal. It’s technology that’s changed.

“We decided, you know what? This particular stock is being pushed lower artificially, why don’t you and I buy some for that and kind of bolster some of them,” he says. 

Reddit investors are trading most actively on GameStop shares. 

Dickison believes the market may be more volatile over the next couple years, but he says that shouldn’t affect long term investments.

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