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Diamond hands to the moon meme4/27/2023 Research shows that relatively few individual stocks outperform the market. Only about a quarter of stocks that rocketed 200% or more went on to subsequently outperform the market through May 2022. Investors who bought in after the 200%-plus gain likely fared worse. Suppose an investor was lucky and bought one of these 46 names two weeks before it notched the 200%-plus gain.Īpproximately 30% of those stocks ended up underperforming the overall market (as represented by the Russell 3000 Index) through May 2022. Some of these names were well-known meme stocks such as AMC, Eastman Kodak Company, GameStop, and Workhorse Group Inc., each of which is down substantially from its high. Of the roughly 3,000 names in the Russell 3000 Index, less than 2% (46 names) rose 200% or more over the course of any two-week period from March 2020 through May 2022. To have the chance of quick riches on a single stock, you must pick the right one before it goes up. The hypothetical investor must also decide when exit, which is easier said than done. Of course, t his hypothetical case study uses the benefit of hindsight.īut it clearly shows how, even if someone boards the right meme-stock rocket ship relatively early, riches are not guaranteed. Meanwhile, over the same period, the Russell 3000 Index ( a capitalisation-weighted stock market index that seeks to be a benchmark of the entire U.S stock market) rose 18% and with far less volatility. Paper Hands happened to be one of the “ get rich quick” success stories with an investment that tripled in a few short months.ĭiamond Hands, believing AMC was still en route to the moon, held on, but after a bumpy year finally let go and sold-down 19%. Paper Hands then sold a few months later, on the second-highest trading-volume day, at the all-time-high closing price of $62.55. This story unfolded in many ways, but based on trading volumes and volatility as catalysts for the actions of hypothetical investors, Dimensional compared the journeys of a hypothetical “Paper Hands” investor versus a “Diamond Hands ” one.īoth bought AMC on January 27, 2021, when the stock hit a record trading volume of 1.2 million shares and closed at $19.90 per share. Here we have an example of how investors’ experiences with the same security can be dramatically different. Take the infamous meme stock AMC Entertainment Holdings Inc. On the flip side, “paper hands ” is an insult hurled at investors who are perceived as weak because they exited a stock position too early. This refers to investors holding onto a stock, despite the pressure of heavy losses, because they believe the stock price will rise again. Part of the meme frenzy of sending certain stocks “to the moon” relies on what members of the meme-stock community call “diamond hands".
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