Is GameStop Surge After 'Roaring Kitty' A 'FOMO'? Expert Warns 'Retail Investors Need To Be Wary'

A financial expert has issued a warning to investors about the potential risks associated with meme stocks, particularly GameStop Corp. GME.

What Happened: Douglas Boneparth, a certified financial planner and the president of Bone Fide Wealth, advised investors to be cautious when considering meme stocks like GameStop, CNBC reported on Monday. He emphasized the importance of understanding the motivations behind such investments.

“Retail investors need to be wary,” Boneparth said.

“Is [fear of missing out] leading the way or is this legitimately a great opportunity to jump in?”

He suggested that investors should thoroughly research a company’s core business model and its long-term revenue plans before investing in any stock, meme stock or not.

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While acknowledging GameStop’s recent turnaround, Boneparth recommended a more hands-off approach for most investors, suggesting that exchange-traded funds and mutual funds provide automatic diversity by spreading investments across top-performing U.S. companies.

He also advised investors to think long-term and avoid using a company’s short-term performance to predict its future behavior.

Why It Matters: The warning from Boneparth comes at a time when GameStop’s stock has been experiencing significant volatility. The surge in GameStop’s stock was attributed to a series of posts by Keith Gill, also known as Roaring Kitty, on the social media platform X. This led to a frenzy in the meme stock community and a substantial increase in GameStop’s valuation.

Moreover, the Roaring Kitty mania also had a ripple effect on the meme coin market, causing coins themed on kitty avatars to soar to unprecedented heights. This further highlights the influence of social media on the financial markets and the potential risks associated with meme stocks and cryptocurrencies.

Price Action: On Monday, GameStop closed 74.4% higher at $30.45 while it was trading 38.8% higher in the Tuesday pre-market at $42.25 at the time of writing, according to Benzinga Pro.

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Image via Shutterstock

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