Preface to this article:
Last week, I lost somewhere around $3,500 in the Stock Market. Mainly on GameStop Stocks.
In my last post, I talked about how GameStop stock was on the rise, and how everyone investing in it was against the billionaires on Wall Street. And for a few days last week, it looked like we were actually going to win, and drive the price far beyond projections.
But then the weekend came and went, and something changed. The price started falling. The stock fell from $468 a share, down to $70 in the span of 72 hours. The thousands of dollars of profits I had made, were now in the red.
Meanwhile, the rapidly growing subreddit r/wallstreetbets had not given up hope. Every post cried out that the squeeze had not happened yet, and instructed no one to sell. “Selling is exactly what they want!” most exclaimed. “We need to hold the line to get the price back up!”
Looking at this subreddit, I’d say losing $3,500 is a blessing compared to the losses I see. Some people have lost thousands, even millions over the past week. Retirement funds drained, credit cards maxed, and yet the price continues to drop.
I continued to hold, but slowly I started to realize the price might not climb back up. At first I felt stupid for thinking this, because I had seen dozens of charts on the subreddit showing that the price would fall before shooting back up. But watching my money quickly disappearing, I finally made the decision to cash out at a loss.
The crazy part is, I had fully planned on cashing out whenever the stock reached $400 a share. When it inevitably did, I was fully prepared to sell. However, everyone on the subreddit kept repeating that “$1,000 is inevitable.” So, I gambled and hung on for a little longer. That gamble cost me.
But how could this happen? I’m always very smart and careful with my money, only spending and investing it in things I know will benefit me or others. So how did I so easily throw my money towards this stock and lose it all?
Simple terms: Herd Mentality.
After cashing out, I began to browse some of the other investing subreddits and websites. What I found blew my mind. There were hundreds of people discussing that the squeeze inevitably happened at $468, and if anyone held on longer they would lose everything. The metrics and analytics all confirmed this. The real question: why was this information nowhere to be found on r/wallstreetbets?
Let’s make an example. If you’re in a room of 100 people, and everyone else is doing the same activity, you’d feel awkward or left out if you didn’t do the activity yourself. What you miss though, is the 1,000 people outside the room laughing at how ridiculous you all look.
r/wallstreetbets saw a enormous rise in users over the past week, from 2 million to 8 million. New users joined the sub, and saw only one thing; Buy the stock and don’t sell. and that’s what they did. From here, this small community influenced each other to the point they were CERTAIN the stock would reach $1,000 at some point. There was no doubt, because could 8 million people really be wrong?
Yes, they can.
Think of the numerous armies and movements we consider to be “evil”. The people fighting in those armies and movements think they are doing right. But if they took a step back, and looked at things from a different perspective, instead of only listening to the propaganda and influence from their own side, they might change their mind.
The idea of Herd Mentality can apply to so many things. But the one I want to touch on specifically, is your plan for life. Everyone tells you to go to school, get a job, get married, retire at 65, and die. That is what the majority of people do. And if you enjoy that? Great for you.
But that’s not what you have to do.
There are so many avenues and paths to take in life. You’re not bound to what society or any other group wants you to do. You have the freedom to look beyond the path ahead of you, and choose what you want, even if it goes against the Herd.
I chose to cash out and lose $3,500, while another user had lost $7,300,000 and still refused to sell. Just as you could pursue your dreams, while another person gives theirs up to live an unfulfilled live.
Break free from the herd.