Beware ‘chasing rainbows’ in stocks: Gillham

Investors backing herd trends like GameStop and silver stocks are “chasing rainbows” and risk losing thousands of dollars, according to Wealth Within’s Dale Gillham. 

Retail investors bought up silver stocks last week, encouraged by social media posts on Reddit, in the hope they would be next GameStop which caused silver to rise in demand but then fell to trade lower.  

Shares in small-cap silver stock, Golden Deeps, for example, traded $1.2 million shares in one day compared to its usual trading range of $10,000-$20,000. 

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Similarly,  ETFS Physical Silver ETF saw inflows of $76 million in one day compared to unit creations of $4.3m in the previous week. 

Gillham, chief analyst at Wealth Within, said: “While I appreciate the desire to make money, there are always those who like to chase rainbows hoping to find that elusive pot of gold, which is why lotteries are so popular. However, unlike the lottery where you only pay a few dollars for a ticket, those who chase rainbows in the stock market typically lose thousands of dollars and sometimes much more.  

“Reading chat forums or watching YouTube videos hoping to find the next big winner is a pursuit that generally results in the opposite occurring and rather being a master of the market, many become a statistic.”  

Shane Oliver, chief economist at AMP Capital, said: “The Reddit crowd will work out just like everyone else has over the decades that there is no free lunch when it comes to investing and excitement does not necessarily equal investing success. As always it may take a bit of pain to learn that lesson.” 

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