Founded in 2012 by Jaime Rogzinski, a former bank IT consultant living in Mexico City, the popular Reddit forum for retail investors has more than 10 million members who avidly discuss investing in the stock market, as well as speculative trading, or making high-risk investments with the hope that they will increase in value. In recent months, WallStreetBets has actually moved the market. 

These “Redditors” have caused big swings in the value of companies known as “meme stocks” or “You Only Live Once” (YOLO) stocks, which tend to be for companies that have been overlooked or have decreased in value, such as GameStop or AMC Entertainment, and are heavily shorted by hedge funds. The members of WallStreetBets say they aim to “democratize” investing and make it more accessible to average people. At the same time, they hope to take aim at hedge funds by driving up prices on those overlooked stocks they’ve shorted.

In January 2021, these investors, who refer to themselves as “apes” and “degenerates,” started buying shares of GameStop, pushing the stock’s value to a record high of $483 on January 28, 2021. This rush of investors produced what’s known as a short squeeze, which happens when the stock price of a heavily shorted company starts to increase. Short sellers are then forced to buy the stock back at higher prices.

More recently, at the beginning of June 2021, Redditors swarmed AMC Entertainment, pushing the stock’s price up 2,850% during 2021, and causing the New York Stock Exchange (NYSE) to halt trading in early June. The price fell, however, after AMC announced that it would sell 11 million shares to hedge fund Mudrick Capital Management. 

Here’s a quick guide to how these Redditors use emojis and internet slang to discuss investments: 

•   Investors on Reddit use this bull emoji when they’re bullish on an investment, meaning that they think it will increase in value. Those who are often bullish are known as being part of the “Bull Gang.”
• The bear emoji means the opposite, denoting that someone is bearish on an investment and thinks it will decrease in value. People who are often bearish are part of the “Bear Gang.”
•   Redditors use the rocket emoji to indicate which stocks they’re hoping to “send to the moon”, or quickly increase in stock price.
• These two emojis together mean “Diamond Hands.” On WallStreetBets, users encourage each other to have diamond hands, or hold on to their investments and avoid selling. 
• On the flip side, these two emojis mean “Paper Hands” and are used to classify investors who sell their shares earlier than others, according to WallStreetBets. Paper Hands and Weak Hands are used interchangeably. 
• This emoji stands for “tendies,” short for chicken tenders. A Reddit user might say they are going to cash in their “tendies,” meaning that they are going to realize their profits from an investment by closing their position. 
• YOLO of course means “You Only Live Once.” On WallStreetBets, investors use this acronym in reference to speculative investing when putting money in an investment that they hope to increase in price. 
• Stonks is an intentional misspelling of the word “stocks,” and is meant to poke fun at the stuffy nature of Wall Street and make the stock market more approachable to the common person.  You might see investors on WallStreetBets refer to stocks this way. 
• $BECKY is used to describe investments in companies such as Starbucks, Ulta, Lululemon, and Etsy, that are often solicited by young, white women. Becky is a slang term that is  synonymous with a young, white woman who is ignorant of her privilege. (It’s also a reference to the Beyoncé song “Sorry,” where she references a woman named Becky with whom her husband allegedly had an affair.)
• GUH is an exclamation often used in text to express shock that investors might use in response to quickly losing a lot of money on an investment. GUH was first used in October 2019 by a user named /r/ControlTheNarrative when he lost $45,000 in Apple.
• Bagholders are people who hold onto their investments after they lose value, without the expectation that they will increase in value again.

While it might be fun to follow these threads on WallStreetBets, remember that all investing involves risk and there’s no guarantee that any investment you make will increase in value. 

Stash recommends following the Stash Way® when you’re investing small amounts regularly in a diversified portfolio of investments such as bonds, stocks, and exchange traded funds (ETFs).¹ Having a diversified portfolio can protect your money from market volatility. 

You can start building a portfolio with Stash today.

The post Stash’s Guide to Reddit’s WallStreetBets Can Help You Understand the Lingo appeared first on Stash Learn.

What does it mean to short a stock? 

Typically when you buy a stock, you create a “long” position, meaning you purchase it at its current trading value. 

Shorting is the reverse of buying long. It’s basically betting against a stock, and it’s a key technique used when an investor believes that the price of a stock will be lower in the future. In simple terms, it allows an investor to sell a share at the current price, while requiring them to buy the shares at some point in the future at an unknown price. This tactic involves borrowing shares from a broker, selling them to someone else, and betting that prices will drop before they decide to buy it back. At that point, the investor buys back the shares at the cheaper price, returns them to the broker—and pockets the difference (minus interest charged by the broker). However, if the share price is higher, the investor will lose money.

Short selling requires what’s called a margin account with a broker. There are lots of SEC rules and limitations on margin accounts—and plenty of risk. At Stash, we believe that shorting is best left to the pros, so we do not offer this to investors.

What’s a short squeeze?

Sometimes a large group of investors might believe that a company’s prospects are not good, and take very large short positions in the stock. In that case, investors are betting the stock will go down, and a significant percentage of the company’s outstanding stock is sold short. This can make the company vulnerable to something called a short squeeze. 

A short squeeze happens when the stock price of a heavily shorted company starts to increase. Short sellers are forced to buy the stock back at higher prices.  As they begin to buy the shares, it forces the stock to go even higher. This “squeezes” other short sellers, who are also then forced to cover their shares, and the cycle continues.

Usually a short squeeze happens when a company announces surprisingly good news. Imagine a company that is heavily shorted because many investors believe that the company’s revenue will decrease significantly. Let’s say that company instead announces that it has a new product line and revenues are going up.  In that case, the stock price may start to head up, and a short squeeze may begin.

Sometimes, although not typically, investors band together to buy a company’s stock, driving it ever higher. These investors may not be buying based on fundamentals, and are simply bidding up the stock to create problems for short investors. 

While there’s nothing illegal about this practice, in recent months short squeezes for various companies are reportedly being driven by small-time investors involved in options trading. Options trading can get complicated, but essentially in this scenario it means investors purchase a contract for a particular stock at a specified price, often much lower than the current trading price of the stock in question. 

That can also lead to continued increases in that stock’s price, and the risk of increased volatility. 

Blackberry, Gamestop, and more

Companies that have been involved in investor short squeezes in recent months include the video game retailer GameStop. The smartphone maker Blackberry and entertainment giant AMC have likewise been the subject of squeezes in January, 2021. And in fact, investment bank Goldman Sachs’s list of the most shorted stocks is reportedly up 25% in 2021, showing that shorting activity has increased dramatically this year.

Follow the Stash Way

At Stash we don’t believe in speculative investing. We believe in time in the market, not timing the market.

Remember, all investing involves risk, and you can lose money in the market. Stash recommends following the Stash Way, which involves investing for the long term, investing regularly, and diversification.  

The post What’s a Short Squeeze? appeared first on Stash Learn.

Life hands us daily challenges that require spending our hard-earned cash. Meanwhile, the financial world is filled with so many confusing terms and concepts. And today, more than ever, there’s a lot of uncertainty about the future. Nearly 140 million people in the U.S. struggle with at least some of the financial basics, meaning they may not have access to the education, resources, and planning tools that can make them financially healthy.

That’s why we’ve created something called the Stash Way. It’s our guide to helping you achieve financial wellness, encompassing smarter budgeting and saving, a diversified approach to investing, as well as planning for the future with retirement accounts and insurance. 

It translates into six financial objectives :  

Spend less than you earn.

Pay bills on time.

Save cash for emergencies.

Invest regularly.

Diversify and think long-term.

Insure your assets and yourself.

Each step of the Stash Way is designed to help you manage some of the biggest pain points that consumers face when it comes to their finances, based on research from the Financial Health Network (FHN). FHN, a not-for-profit association of more than 160 financial services, policy, and consumer advocacy organizations, including Stash, is dedicated to helping ordinary and underserved people build a strong financial foundation and achieve financial wellness.

We’ll do a deeper dive into each topic in other articles, but briefly here’s a bit more about each component of the Stash Way: 

Spend less than you earn

At Stash, we believe the first step to taking control of your finances is having a clear picture of how much money you have coming in as income, and what you have going out as expenses each month. A budget can help you make sure you’re not spending more than you earn. There are numerous types of budget you can try, or you can feel free to create your own. 

And you need to get a handle on what you spend, because probably the most important financial goal for everyone when they start planning their financial lives is saving. 

Pay your bills on time

Paying your bills on time goes hand-in-hand with building a budget. Make sure you include your bills as part of your monthly essential expenses so that you’ll pay them on time each month and not get behind on payments.

Staying on top of your bills can insure that you maintain a good credit score, which measures how well you manage your debt. 

Save for the unexpected

You’ve probably heard the expression, “pay yourself first.” That simply means saving a portion of your income as you receive it. For most of us, that’s through weekly or bi-weekly paychecks. For many others, for example those who work in the gig economy, pay may be more sporadic, but you can still think about taking a portion of each paycheck and devoting it to savings. 

Saving for the unexpected requires different saving strategies and different plans for your money. At Stash we encourage users to create two different kinds of funds. One is called your rainy day fund, and it can be used for short-term unexpected things as they arise. The other is your emergency fund, and it’s for bigger unexpected expenses, such as loss of a job, large medical expenses, or something else of that nature.

Invest regularly, diversify, and invest for the long-term

If you can, start to invest in the stock market. Investing for the long term can help you take advantage of something called compounding, which is an echo effect that saving and investment earnings can both have. And regular investing can help you get a better price experience when purchasing securities such as stocks and bonds. 

Diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.

When thinking about long-term investing, it’s also important to consider retirement planning, which can include putting money into accounts such as a Roth or traditional IRA.

Insure your yourself and your assets

Budgeting, saving, and investing are building blocks that let you tackle the final goal of the Stash Way, which is insuring yourself and your family. 

Having the right insurance can help you stay on track financially, and it can be crucial to making sure you, your loved ones, and your property are protected from the impact of unexpected events like death, an accident, or an injury.

The post The Stash Way: Stash’s Complete Framework to Help You Achieve Financial Wellness appeared first on Stash Learn.