Wanting to get rick quick is a dream that many of us have adopted since buying our first Lottery ticket. And for most of us, that’s as far as it goes. We buy a chance of a dream, a hope – and we spend just a small amount of money each week for that dream. Of course, although we always hope that our numbers will be called we know the reality is that we have just spent money that we will never get back.
So, what happens when social media is tempting you in to other ways of chasing that dream?
In early 2021, what started a post on Reddit, ended with a failing company called Gamestop becoming the focus of global stockmarkets. The fast paced impact of social media, and a fear of missing out of their chance to get rich quick drew many people in. Online trading accounts, quick and easy to create, were set up, deposits made, and rookie “investors” were putting money into something they didn’t understand.
Why had they done it? Well, the constant impact of tweets, posts, reels and stories from “friends” telling us how they were raking in the profits was something that tugged at their dream-strings, and they wanted a piece of the pie too.
In reality, a few made money, but the majority didn’t, and should have stayed well away in the first place.
This isn’t an isolated case, with many looking for a quick fix and being drawn into posts on Reddit, Twitter, and the like.
In spring the same year, the noise was all about Dogecoin, which become an overnight phenomenon. What started out, literally, as a meme, a joke on Reddit, saw its “value” increased by 800% in just 24 hours. Celebs increased the hype online, and it surged from less than 1c at the beginning of the year to around 60c in May before falling heavily….and sitting at around 28c today.
Of course, most people didn’t buy at 1c (or anywhere close)…but they saw the prices going up each day. They got caught up in the frenzy, and with that FOMO, threw money into something they didn’t understand, in the hope of achieving their “get rich quick” dream. In reality, the majority ended up selling at a loss, or are holding on with the hope that the hype will return, the next lot of FOMO “investors” will get drawn in, and the price will go up again.
This is nothing new, and over the 30 years I have been working in the investment industry, I’ve seen numerous “pump and dump” scenarios, and frenzies over high risk strategies such as investing in penny shares. This has been happening for many years prior to the internet phenomena, but it has been significantly increased since.
But we need to be reminded. This isn’t investing. It is more akin to gambling – and it is those who can least afford to take the losses, such as students, that can easily get caught up in it. Through my career I have seen people risking their rent, increasing their credit card borrowings, and even taking out loans against their homes, just so they can avoid that fear of missing out on something that they blindly believe is going to get them rich quickly. The reality is, they often have as much chance with that lottery ticket, and with less money spent.
Now, I’m not saying that no one should ever take a risk, because all investment carries an element of risk. Even leaving cash on deposit, with interest rates so low and inflation at the current rate means that doing nothing is a risk. But it is all about knowing what level of risk you are entering into, and understanding and being able to afford the consequences if it doesn’t go your way.
If it seems too good to be true, it usually is. Just because someone on Reddit or Twitter is shouting about it, doesn’t mean there is anything there to shout about. Note how quiet they all go when the bubble bursts….until the next time!
Caveat Emptor – Buyer Beware. Do your research. Don’t commit more than you can truly afford, and don’t be afraid to step away.