PEORIA, Ill. — Last week, the nation watched as the price of GameStop stock skyrocketed to over $300 a share.
A large group of users from Reddit decided to short squeeze the stock, driving the price up for hedge fund managers who had made bets against the price rising.
However, Baird Financial Advisor Scott Mabee says not all hedge fund managers were hurt by the squeeze.
“There’s another hedge fund manager that made $700 million off of the trade,” said Mabee. “Certain hedge fund managers got beat up, and certain hedge fund managers made a lot of money on it.
“Usually when you look at any of these hedge fund managers, they’re going to make big wins and big losses along the way. This just earned a lot of publicity because of how it happened.”
Overall, the long-term implications could benefit investors as a new group has entered the market.
Studies show that 42% of internet users ages 18-24 use Reddit. In addition, only 32% of people aged 18-29 own stock compared to 59% of people aged 30-49.
Baird Financial Advisor Scott Mabee says last week’s craziness on the market could lead to new interest among young people.
“Now, we have younger kids that see a 401(k) or SIMPLE IRA that they can put money into and be interested how they can grow that money,” said Mabee. “I think that’s the good thing – that people are being interested in the market and understanding how it works.”
Mabee said his best advice to give to anyone new to the market would be to do research before buying.
“Do it smartly, and you can grow your money yourself,” said Mabee. “As long as you do it the right way and make educated decisions along the way – not just gamble on it.”
Younger investors may not be the only thing beneficial that comes out of last week’s events, however.
Mabee expressed his hopes that more transparency will come from companies like Robinhood after they restricted trading of certain stocks.
“There could be reasons behind [restricting trading], but it should be known why that’s happening,” he said. “If they stopped [trading] just to save themselves, that’s one thing – if they stopped it for capital requirements, that’s a completely legit reason.”
Mabee said it will be good for everyone with younger people becoming interested in the stock market, but it has to be done in an educated manner.
He said resources such as MarketWatch, Yahoo Finance and financial advisors are good resources to “control your own destiny” with money invested.
Full interview with Scott Mabee:
