If you have been watching the news lately, you have probably found yourself wondering, “What’s going on with this GameStop stock? Does that affect me as a long-term investor? How much attention should I be paying to this?”. You are not alone. These are all natural questions given all the noise surrounding the GameStop saga. As your Charleston investment advisors, we believe these questions are best answered by taking a step back and looking at the broader picture. Continue reading for a comprehensive look at how GameStop stock fluctuations have impacted the stock market, as well as how recent events may impact your own investment portfolio.
Investment News: What Is Happening to GameStop Stocks and How Will It Impact the Stock Market?
1 – Analysis of the GameStop’s Short Squeeze
If you haven’t quite caught up with recent news, here a brief summary of current happenings to fill you in. January 2021 saw non-professional retail investors, those who invest for their own personal accounts, coordinate a considerable price increase (almost quadruple the original) in GameStop (GME) stock using the Reddit platform. This event, best described as a hectic trading mania, cost traditional hedge funds on Wall Street millions of dollars. The good news is that, outside of its impact on a handful of businesses like these, the rest of the stock market continues to behave normally.
2 – History of Collective Investment Strategies
History shows that individual asset prices can be swayed by collective trading driven by greed, fear, or simply boredom. GameStop is simply the most recent example of speculative betting leading to pricing that has become wildly disconnected from the fundamental value of an asset. History has provided numerous other examples of pseudo price bubbles, from Dutch tulips in the 1600s to dot.com stocks in the late 1990s. There have been movies made and books written that show that these stories typically do not end well for “Average Joe” investors. Too often, fad investors get caught up in such market phenomena and lose their retirement savings, as these economic bubbles can burst within a matter of minutes.
3 – GameStop’s Impact on Investment Portfolios
Given the extensive diversification of Morris Financial Concepts’ investment portfolios, price changes in GameStop stock do not have any meaningful direct impact on our clients’ investment returns. While these headlines have no doubt been interesting to follow, they are more of a sideshow in the context of current and future returns for broader markets. We believe the market’s return will continue to be driven by factors such as COVID-19 rates, vaccination rollouts, and fiscal stimulus in the short-term, as well as broad economic growth in the longer run.
4 – Morris Financial Concepts’ Investment Strategies
Our investment process remains guided by client needs and risk tolerance, 100+ years of market history, and robust academic research. That research clearly illuminates the risks involved with chasing the next shiny object. Diversification is our friend. Our investments are geared toward long-term objectives like retirement, so your portfolio is composed of reputable corporations that are not subject to short-term market whims. As always, you can rest assured that your long-term financial wellbeing is not tied to the news headlines of the day.
5 – What to Expect from Our Charleston Investment Advisors
We will remain in touch with updates as we continue to navigate through the challenges presented by COVID-19, as well as the new political environment. While market breadth is healthy, interest rates are low, and credit markets continue to function as they should, periodic volatility is likely, given some of the near-term uncertainties. We remain confident with our long-term portfolio positioning.
If you are struggling to manage your portfolio, contact our investment advisory firm in Mount Pleasant, SC, today. For more than 30 years, our team of CERTIFIED FINANCIAL PLANNER™ professionals, investment advisors, and wealth management consultants has provided personalized investment management. Charleston, SC, isn’t our only service area, though. At Morris Financial Concepts, we offer comprehensive, tailored financial solutions to clients around the world. We look forward to partnering with you on your journey to achieving both your personal and financial goals.
Take care and stay well,
About the Author
Bart Valley is a Chartered Financial Analyst® at Morris Financial with over 16 years of experience in investment counseling and consulting experience. The CFA® designation is one of the most renowned and respected investment credentials in the world. Bart primarily focuses on providing detailed investment counsel, education, and guidance that aligns with holistic financial goals and life aspirations. Bart is a valuable member of the team that works collaboratively to clarify individual wants and needs. He provides a risk assessment to establish and implement comprehensive, tailored investment plans for our Morris Financial clients.
The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future results. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. The Chartered Financial Analyst (CFA) is a qualification for finance and investment professionals, particularly in the fields of investment management and financial analysis of securities. The designation is an international professional certification offered by the CFA Institute to financial analysts who complete a series of examinations. Each CFA professional must pass each of three six-hour exams, possess a bachelor’s degree from an accredited institution, and have four years of qualified professional work experience. CFA charter holders are also obligated to adhere to a strict Code of Ethics and Standards governing their professional conduct. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. Please refer to www.cfainstitute.org for further information. Certified Financial PlannersTM (CFP®) are licensed by the CFP® Board to use the CFP® mark. CFP® certification requirements include: Bachelor’s degree from an accredited college or university, completion of the financial planning education requirements set by the CFP® Board (www.cfp.net), successful completion of the CFP® Certification Exam, comprised of two three-hour sessions, experience requirement: 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of Apprenticeship experience that meets additional requirements, successfully pass the Candidate Fitness Standards and background check, agree annually to be bound by CFP® Board’s Standards of Professional Conduct, and complete 30 hours of continuing education every two years, including two hours on the Code of Ethics and Standards of Professional Conduct. MFC-21-04.