Boom or bust: my one week roller coaster with AMC
Thinking about investments can be overwhelming; one needs to look to credible sources to expand one's knowledge on where the smart money is.
I TYPE this with a keyboard damp from my sweat-drenched palms. I am thinking of the free US shipping my beefy Amazon order will qualify for with this new margin my 20 AMC shares have bagged, when in two swift seconds the needle shifts and I am back to a near-negative profit margin.
The spotlight is on yet another "meme" stock which, to most, reads like an all-too-familiar tale. I was one of the spectators of the GameStop saga earlier this year, in quiet mirth at the "bad guy" hedge funds' glorified misfortunes, at their dismissal of the Reddit-rallied investors as pig-brained gamblers who knew nothing. I fantasised being on the winning end of that frenzy, but also stopped short at the reality of the risks involved with that type of volatile trading.
GameStop has made a resurgence this week with a 30 per cent jump. However, all eyes are on AMC Entertainment's soaring 160 per cent. Reddit is once again the retail investors' stomping ground, this time with Twitter as an amplifier with trending hashtags #AMCSTRONG and #AMCSqueeze driving US$209 million of net inflows into the company's shares just this week.
I had recently - pre-Heightened Alert - sat down for lunch with a friend well-versed in financial knowledge. I understood the importance of saving, but had little depth when it came to managing those savings. When I consulted him for advice, he used the word "rotting" to describe my savings account earning a paltry sub-1 per cent annual interest. That was evocative enough of a word for me to finally put my money where it would work harder.
This move was well-timed with the emergence of no-fee trading platforms and the surplus of investable cash from the government's pandemic relief payouts.
I put a small sum of my savings into Moomoo, a one-stop investment platform. I was drawn to its speed, free deposits and withdrawals; low transaction fees and not least, its entertaining forum page. I do not follow r/WallStreetBets, nor have a Twitter account, and so would have been left in the dark if not for my routine check of Moomoo's forum page.
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Thread postings calling for AMC's "Apes" (the stockholders' self-given membership title) to 'hold' and 'shoot for the moon', flooding the page was what eventually brought my attention to the U$19.56 AMC stock price which was trading at a volume of 2.4 million shares on May 17. This was already a 100 per cent jump at the time from just two weeks prior, according to my rudimentary analysis of the graph.
I recognised the stark resemblance to the GameStop surge and bought 20 shares, secure in my ability to cap my losses with the stop limit - an option that I could set to automatically sell my shares at cost price. This was a relatively small quantity of shares compared to the thousands per transaction that were being traded, but I felt the weight of each, compounded by the opportunity costs that were doubling every day. I could have set a trigger on a sale but the stock was volatile, it could jump 100 per cent in half the time it took to drop the same percentage.
My shares felt like a toddler I had to keep an eye on at all times in case he ran in the other direction. What was important for me as an amateur trading in a market where the rules did not apply was to firstly, acknowledge the brevity of this opportunity; and secondly, watch my greed.
I was a victim of the typical Who Wants To be a Millionaire dilemma. I could either walk away with a substantial profit now, or wait for a larger payout but risk losing all of it. Checking my phone every two minutes became a nervous tick, I was getting addicted to my market watch.
I eventually ended up unceremoniously selling off the shares at cost price, bowing out when the next dip hit. I walked away without any tangible profit, but I did learn a few lessons about "buying low and selling high"- it is not as simple as you think.
This short-lived AMC escapade would have been irresponsible had I not exercised the right amount of discipline. I was lucky to have had the disposable income to so frivolously dabble in this space. I sympathise with the gig workers whose income I imagine would suffer the same precarity at the mercy of the industry.
I do eventually want to learn how to more wisely stock pick, and park the rest of my savings in more stable avenues of growth. Thinking about investments can be overwhelming with the many pies you can dip your fingers into. You have stocks, real estate investment trusts, bonds, crypto, gold and even wine.
I will be looking to more credible sources than Reddit, such as podcasts and financial newspapers, to expand my knowledge on investments. I am still a full-time student, full-time intern when I am not in school and - at least for now - lack the time to pick and manage individual stocks for a healthy diversified portfolio.
Investing in exchange traded funds (ETFs) has been a smart solution for me. They are essentially a basket of assets whose performance aims to mimic that of an index, like the S&P 500 for example. These funds are low-risk and safe instruments to consistently feed as unless the market crashes, the fund will - over time - grant you robust returns.
This may be a slower generator of wealth; however, it is stable and can even be an entirely hands-off option if you were to use a robo-adviser to pick your ETFs for you. You may not be able to get rich quick but you can definitely get richer quicker by investing. And my poor frazzled nerves will thank me for it too.
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