MICHEL MARTIN, HOST:
Remember when GameStop kind of broke the stock market? A few years ago, some traders outmaneuvered hedge funds to briefly rally the video game retailer's stock price. Since then, this new generation of meme stock investors has stuck around and evolved. From our Planet Money podcast, The Indicator, Darian Woods and Wailin Wong explain.
WAILIN WONG, BYLINE: Nathaniel Popper spent almost a decade at The New York Times, covering the intersection of Wall Street and Silicon Valley, and he says before the meme stock frenzy of the pandemic, the last boom in individual trading was during the '90s dot-com bubble.
NATHANIEL POPPER: And I was just fascinated by the question of where this whole new generation of trading came from, and what it means.
DARIAN WOODS, BYLINE: Nathaniel says teenagers as young as 13 were signing up on Robinhood.
POPPER: That totally changes the dynamics of the trading, because it's young people with all the sort of, like, adrenaline and risk-loving tendencies, and in the 1990s, you know, the fact that it was sort of generally middle-aged and older people made it a much more sedate affair.
WONG: Nathaniel got original data from a firm called Vanda Research. This company tracks non-professional individual investors, aka retail traders, and it can distinguish their activity from trading related to investing in retirement or mutual fund accounts.
WOODS: The data from Vanda Research showed that in the first half of 2023, amateur traders put $118 billion into stocks. That's roughly the same amount that flowed into stocks in early 2021, during the GameStop mania, and it's more than quintuple the level of amateur stock trading pre-pandemic.
POPPER: This is really young people, and they are trading in a way that, sort of, previous generations of retail traders did not.
WONG: So what's kept these young people in the market years after the initial excitement around meme stocks? Number one is the sheer entertainment factor. He says day trading is like the new reality television, and meme stocks made for a riveting inaugural season of this reality TV show.
WOODS: Nathaniel says, just like social media gives you that dopamine hit when you refresh a feed, there is an addictive quality to this kind of investing. Sports gambling has also gotten really popular among young men in the last few years, and Nathaniel sees a connection between these different forms of entertainment.
POPPER: The markets provide, like, a better version of that feedback mechanism, that feedback loop that social media gives us, which is that you can just, like, keep checking back and something has changed, and just that little bit of change is enough to keep us coming back for more, I think.
WONG: So that's the entertainment factor, and Nathaniel says the second big reason these young investors have stayed is a sense of community. Wallstreetbets is still one of the largest forums on Reddit, with 16 million members, and the last big reason that Nathaniel sees for amateur investors to stick around is that a lot of them did actually make money, or they realized that investing over a longer term was likely to generate returns.
WOODS: There were plenty of horror stories of day traders getting wiped out, especially if they had made risky bets on things like cryptocurrencies, but overall, Nathaniel says the bull market of the early pandemic paid off for a lot of these new investors.
WONG: Wailin Wong.
WOODS: Darian Woods. NPR News.
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