The retail trading community continues to move stocks more than a year after the initial meme stock mania in early 2021.
The founder of r/WallStreetBets, a reddit forum for retail traders to discuss stocks and options, had some advice for the community: The best financial education comes from the school of hard knocks.
“I've learned a lot from my experience,” Jaime Rogozinski of r/WallStreetBets told Yahoo Finance Live (video above). "There's one thing about the stock market that no book can teach you, which is getting control of your emotions and being able to think rationally when you're in a trade."
Rogozinski emphasized that traders of all levels, especially those new to trading, shouldn't fear mistakes. Losses are bound to happen and are key to gaining experience in the market.
"Oftentimes, these retail traders are using smaller amounts of money," Rogozinski added. "They can afford to lose 100% because we're talking about $100 or $50, you know? It's the price of tuition. They can go through, get their hands dirty, and find what it is that they like."
A meme trade versus an investment
The r/WallStreetBets subreddit was formed in January 2012 and now boasts over 12.5 million members. The page went viral for its involvement in the short squeeze and retail trading frenzy that sent GameStop (GME) stock soaring in early 2021 and resulted in a congressional hearing.
"One of the things about retail traders, WallStreetBets, is it's a collective," Rogozinski said. "It's not an individual. The people come together, and they collectively decide."
Rogozinksi explained that retail traders tend to be younger and more "hands on" with their finances.
On r/WallStreetBets, "what it permits them to do is to learn about this in a fun sort of way, speaking a language that makes it accessible," Rogozinski said. "I oftentimes say that... the concepts that CFAs, Certified Financial Analysts, have or [those with a] master's degree, they just have a lot of jargon for concepts that are not actually that complicated. On WallStreetBets, you have the exact same concepts, but they have easier words, or they'll have different words that sometimes make it more cartoonish, more fun, more meme-like."
Gallup research from May 2022 found that 56% of U.S. adults totaling 144.6 million people own stock, including 25% of households earning less than $40,000 per year.
While many shareholders are investing over the long term for goals such as retirement, Rogozinksi noted that meme stocks are a different animal entirely due to their unpredictability.
"These aren't investments, these are trades," Rogozinski explained. "And so if you want to get into an extremely volatile trade like GameStop or like a meme stock, you need to know how to trade it properly."
Meme stocks tend to be consumer-facing companies that traders already have a relationship with, such as the aforementioned GameStop, AMC, or Bed Bath & Beyond.
"You need to have a stock for a company that is tangible that retail traders can relate with, not some obscure, I don't know, chemical materials company," Rogozinski said. "This is a store you can go to, this is a car you can drive, this is a chip you can put in your computer."
Meme stocks have 'reminiscent ingredients'
Although r/WallStreetBets has been an incubator for meme stock culture, Rogozinski doesn't consider himself a meme trader.
"I have a very particular style for trading, and it's not the meme stock trading — I never quite figured that one out," he said. "But I definitely enjoy what's happening, and it's definitely a very new phenomenon that I'm not sure a lot of people have actually mastered."
Rogozinski's comments came at the height of a meme-fueled rally in Bed Bath & Beyond (BBBY) stock. Subsequently, shares of the retailer saw a sharp decline after activist investor and GameStop Chairman Ryan Cohen liquidated his 9.8% stake in BBBY for $68 million.
At the time, shares were driven to a high of $28.04 on August 16 before falling 30% the same day. Since then, activity in the stock has cooled somewhat, though shares were still up more than 92% for the month of August.
Though not personally invested in Bed Bath & Beyond, Rogozinski was still "on board" with the notion of it as a meme stock trade.
"You can see that it has a lot of similarities to GameStop," Rogozinski said on the hype surrounding the brand and its trading volume. "We're getting a lot of reminiscent ingredients that we saw during GameStop."
Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.