I’ve mostly ignored the Gamestop noise as I didn’t see any actionable takeaways, but then I saw this
This is the same as saying that you bet $10,000 on the Super Bowl, and then used the proceeds to pay off your student loans. The decision didn’t involve much skill, and you got lucky. You get credit for taking the risk, but is that really a newsworthy event?
Consider that if you bet $10,000 on red at a roulette table twice in a row and won both times, you could also turn $10,000 into $40,000. Simple! Every single person reading this has a 22.5% chance of achieving the exact same feat (American roulette odds). You just have accept the 77.5% chance that you will lose your entire $10,000.
For the most part, these were zero-effort, zero-sum bets. A few clicks, and there is a winner and loser. Last week was not about class warfare, it was just different traders betting against each other. Some average folks won big, others lost big. Some hedge funds lost big, but other hedge funds won big. Nobody “stuck it” to Wall Street! For every Robinhood screenshot that looks like
…there is a Robinhood screenshot that looks like
My concern is we will continue to see people make easy money (whether in Gamestop or another trade), and others will get sucked into this casino. Like a hot craps table, you want to join in the fun as well. When the market goes up, everyone looks like a skilled trader.
I prefer to search for smarter bets where the upside is huge, but the downside is small. Ones that involve investing a decent amount of time but only a little money. Ones where your personal qualities tilt the odds more in your favor. This is still a risk because you might start a business and fail. You might try be a landlord and get a really difficult tenant. You might pursue a specific degree and realize it’s not a good fit. You might ask someone out on a date and get rejected.
In the worst case, you gain valuable experience for later, dust yourself off, and try again. In the best case, you can gain a meaningful life and career (which then leads to financial freedom with a bit of planning). I try to remember that every day we “spend” our time somehow, and it’s a risk because we never get it back. Opening yourself up to the truly big wins is so much better than spending it on gambling (see above), video games, or dead-end jobs.
Here are two WSJ articles about people taking action despite the risks:
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