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Nutmeg CEO warns that meme stocks do not form part of a long-term investment strategy

Meme stock investing

Neil Alexander, chief executive of UK-based online investment app Nutmeg, has warned investors of the danger of meme stocks, claiming that “a lot of people will have their fingers burned.”

Alexander says that investing must be approached “in the right way”, as you shouldn’t just invest in shares that are being chased or shorted. He stresses that investors must have their eyes set firmly on growth for the future.

Meme stocks became a concept in January last year when thousands of Reddit users invested in American video game retailer GameStop. In a matter of weeks, the failing stock surged from about $18 at the start of the month to almost $350 by 27 January. Days later, the stock price fell dramatically, leaving those who bought in at its peak with thousands of dollars in losses.

The surge was mostly propagated by investing apps like eToro and IG in the UK, and Robinhood in the US. Alexander reassures Nutmeg users that the app will not align itself with day-trading apps like these when it expands.

He also warns against the act of stock picking, as it does not form part of a “long-term strategy for growing wealth”. Instead, he and his platform advocate for a long-term, steady investment strategy and detailed research to ensure positive returns over time.

Financial professionals are typically against the idea of investing in meme stocks

Myron Jobson, a personal finance campaigner at Interactive Investor, has likened investing in meme stocks to “gambling”, as whether you make positive returns or not relies on luck, rather than research.

He worries that the GameStop saga may have put a lot of people off investing for good, describing the investment experiences of those who lost big as a “baptism of fire”.

Similarly, Laura Hoy, an equity analyst at Hargreaves Lansdown, claims it is better to “be boring, not bold” when tackling investments. She claims that trying to make a profit with meme stocks by timing the market is incredibly difficult and comes with “a lot of chances to lose money”.

Alexander believes that the “only good thing” to come out of the meme stock frenzy is that it has raised awareness about what you can achieve through investing.

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