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Sep 20, 2021

Meme stocks ‘a gateway to serious investing,’ says

Just over half of new app investors research company before investing

More than three quarters (76 percent) of investors who first entered the markets via meme stocks have gone on to diversify their portfolios, according to data from the trading app

Noting that meme stocks are seen largely as ‘a cultural joke’, the company adds that ‘they are a gateway to serious investing.’

Speaking to these ‘new app investors’ – respondents who have been investing for less than three years and who are all users of investment apps – Public says they are better educated than might be expected. But the bar is still rather low: Public says just over half (56 percent) of new app investors looked at a company’s financial performance before deciding to invest in it.

Of that number, 61 percent read about the company online and 38 percent read its annual report.

Although most are making small investments, with half (51 percent) having invested a total of $500 or less, Public also points to the huge number of trading app downloads, with Robinhood, which was caught up in the meme stock craze, leading the way. All the survey respondents used an app to buy stocks in the past three years, with 63 percent choosing Robinhood. In January 2021 alone, it was installed by 3.7 mn new users in the US, says Public, citing news outlet Vox – nearly four times as many as installed it in January 2020.

This was at the height of users’ anger over Robinhood halting trading in a number of meme stocks. According to Public, Vox said at the time that ‘people are furious with Robinhood but they keep downloading it.’

After Robinhood, Coinbase is the second-most popular trading app, but with just 31 percent saying they had used it in the past three years, it comes in far behind Robinhood. After those two come 30 percent who used an account with their bank and 28 percent who used a big brokerage firm. Thirteen percent used Public.

So where do they get their investment information? Half (53 percent) of new app investors get their information from the community or platform they invest with – by far the main source of information.

After that:

  • 37 percent use YouTube
  • 35 percent talk to friends and family
  • 29 percent use mainstream news outlets
  • 27 percent use Reddit
  • 25 percent use Facebook
  • 20 percent use Bloomberg
  • 18 percent use CNBC
  • 12 percent use TikTok.

Public also notes that users are not wholly motivated by financial gains: 41 percent say their investments reveal something about their values.

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...