TALK RISK
If the kids were intrigued by GameStop, talk
about it.
Don’t understand it? Here’s a quick recap:
GameStop is a struggling brick-and-mortar
video game retailer. Some hedge funds and
other big investors had little faith in it and
“shorted” the stock, essentially betting its share
price would fall. But some smaller investors
decided to drive up the price by buying in.
When a stock is very heavily shorted, a rise in its
price can force short sellers to get out of their
bets. To do that, they have to buy the stock, which
pushes the price even higher and can create a
feedback loop. As GameStop’s short sellers got
squeezed last month, smaller and first-time
investors used online forums to encourage each
other to keep the momentum going.
The stock traded below $10 for most of 2019 and
- This “short squeeze” sent it above $480 last
month before it dropped back to around $40.
Yes, some people made money. But some
people lost big too.
Seize the opportunity to talk about how
different investments involve different levels of
risk. Higher risk investments can result in big
gains, but big losses as well. Also, mention how
some investors might be able to bear those
losses more than others.
THE LONG GAME
Ray Medeiros said he has long talked to his boys
— ages 16 and 18 — about the importance of
investing to build wealth. He worried they might
be sucked in by the allure of a quick buck by