In case you haven’t heard, or you need a refresher, many hedge funds were short-selling GameStop stocks, essentially betting on its decline. These institutional investors shorted the stock so much that they left themselves incredibly vulnerable.
Seeing this, everyday investors organized online through Reddit and came together to call the financial giants on their bluffs. These amateur retail investors began buying shares of GameStop en masse, driving the stock price up. What started as a financial opportunity soon meandered into the realm of a political movement aimed at hitting the financial elite in their wallets.
At that point, the hedge funds had to make the difficult decision to either hold their declining shares and weather the storm or, amid the chaos, sell their shares at significant losses.
The result was billions of dollars gone from the hedge funds' portfolios and a small number of online investors with big winnings.
A divisive fiasco, the tale of GameStop’s stock has created two camps—one calling for regulation to prevent any more online communities from rallying together in a similar fashion, and the other celebrating the fact that the “little people” have beaten the Wall Street pros at their own game.
A Win for the Everyday Investor?
Has this ushered in a new era in investing? Does this change the landscape for regular people trying to grow their wealth and take control of their finances?
Personally, as an angel investor, I don’t see this as a real win for the average American investor. As interesting as the story is, I don’t believe much has changed, stock trading still isn’t a reliable or practical avenue for wealth creation for the majority of people.
On the other hand, nearly everything touted as a win for the everyday investor from the GameStop story has already existed in the form of Regulation Crowdfunding.
Through startup investing via regulation crowdfunding platforms, now anyone can invest like the ultra-rich. In these private markets, thousands of online investors are taking back their financial freedom.
The only difference—big wins in startup investing are more obtainable, sustainable, and repeatable.
And while the Reddit investors’ play has brought criticism from the financial world, angel investing is openly accepted and certainly here to stay.
Anyone, regardless of age, experience, or income, can take part in startup investing online.
Just a few years ago, this investment strategy was kept exclusively for the rich, only accessible to those with high net worths and incomes. Now, this wealth-building avenue is open to all.
And here's the big difference—when investors speculate and trade on the public market, they are competing with massive institutions. The volatility of the GameStop stock—thanks to hedge funds and Redditors alike—only goes to show just how erratic the stock trading game is.
On the other hand, when you invest in startups on the private market, it’s a simple, intimate equation—just you and the entrepreneur.
When you sit down to your computer to invest in startups, you aren’t competing with anyone. No one is manipulating the market. You are simply investing in the companies that you believe in. With this system, the power to build your wealth and control your finances is in your hands.
This is why I still think angel investing is the real win for the everyday investor.