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It’s all about the insanity that peaked last week when investors flocked to the Reddit forum to buy shares in video game provider GameStop, and its value reached unprecedented heights.
The shares of this company were chosen by Reddit investors because they are “shortened” by the big mutual funds.
Photo from 123RF.com/Reddit Social Network
In this context, “shorten” means the share trading method used by the market giants from which they gain if the shares of a particular company fall.
Mass buying of stocks is increasing in value, which is why Reddit investors tried to outsmart and “get rid of” sharks on Wall Street and elsewhere.
This phenomenon began to spread online in late January, and the stories of many people and the real or fake references that Reddit investors first turned to can already be found on social media.
AFP / “Scanpix” nuotr./Akcijų birža
The exact long-term impact on the stock market is not yet known, but major indices such as the S&P 500 or the Dow fell slightly last week.
Accumulators urged to calm down
Shares of US companies account for about 30 percent. the total portfolio of shares of Lithuanian pension funds, 15 minutes indicated by the association that represents them.
In this particular case, there is no reason for the people of our country to worry about accumulating pensions.
However, pension funds do not invest directly in shares of US companies. The association notes that investments are channeled through ETF funds made up of assets that do not face or are exposed to low levels of risk, and that can offer broad diversification of investments.
“In this particular case, the population of our country does not have to worry about the accumulated pension, since the impact of this phenomenon will be minimal or will not be felt at all.” 15 minutes The Lithuanian Pension and Investment Fund Association indicated in the comment sent.
“GameStop is a relatively small company that doesn’t even make the S&P 500 list of companies,” he said.
Photo by Julius Kalinskas / 15min / Seniors
Perhaps the GameStop phenomenon is changing the investment strategy of the pension funds themselves?
“Investing in pension assets is a strictly regulated and equally strict area of internal self-regulation. In addition, the funds’ institutional resources allow managers to quickly access the most up-to-date and reliable information from professional sources, to trust the knowledge of the market professionals on a global scale ”, said the answer.
According to the association, all this protects pension assets from potential manipulations to which less experienced investors can succumb.
Exhale
Financial analyst Marius Dubnikovas also says that pension savers in Lithuania should not worry about the phenomenon beyond the Atlantic.
Nature will take care of her own affairs.
“The situation at GameStop does not change the logic of long-term investment”, 15 minutes said the expert.
“I believe that here there is such a temporary manifestation of modern realities, when the presence of all social networks has united a certain sector of society that relies not on fundamental indicators, but on mutual opinion,” he added.
According to M. Dubnikov, my bad in this situation will end only for those who believed in the long-term success of the GameStop phenomenon.
Photo by Vidmantas Balkūnas / 15min / Marius Dubnikovas
According to him, in the long run, the price of a company’s shares is still determined by its value in a broad sense and not by the number of buyers of shares.
“In other words, nature will take care of its own affairs,” Dubnikov said.
However, history showed the downside of the stock market, leading to the belief that “speculators are open to playing strange games that are not like investing but gambling,” the financial analyst said.
Will regulators step in?
Dubnikov predicts that we will see new rules and restrictions in the stock market later this year as actions from Reddit investors amount to market manipulation.
“A person has the right to invest as long as there are no fraudulent or fraudulent schemes. An agreement between groups of people to influence the price amounts to a misdemeanor, as is the use of privileged information to invest,” said the analyst.
Photo by Luke April / 15 minutes / Marius Dubnikovas
“The investment must be an independent and transparent process, and artificial manipulation is punishable,” he added.
The Lithuanian Association of Investment and Pension Funds also says that the influence of online forums on the manipulation of the share price is a new phenomenon and the supervisory authorities should play a key role here.
“It is likely that as the turbulence in the markets subsides, investors will return to economic indicators and the long-term outlook,” the organization said in a comment.
He stressed that irregular movements in shares can be dangerous for small investors who borrow money to buy shares or decide to use their savings to do so.
“Obviously, the great popularity of individual securities or other financial instruments creates additional risks that can lead to significant personal losses,” the association said.
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