By Jason Zweig
March 26, 2021
This isn’t a bull market or a bear market. It’s a know-nothing market.
Bragging rights used to go to those investors who worked the hardest at learning the most. Now the glory often goes to those who know the least and don’t even care. That has turned the traditional investing hierarchy upside down, although it probably won’t last.
“I don’t know what the f— I’m doing,” a young man said in a TikTok video in January. “I just know I’m making money.” He added that he’d been trading stocks for only three days, but “just like that, made $300 for the day.” In the next few weeks that young man, Danny Tran, racked up roughly 500,000 followers on TikTok.
At the WallStreetBets forum on Reddit, the online chat community, comments like “I can’t read” and “I have no idea what I’m doing” are common. Users insult each other’s—and their own—intelligence as terms of endearment and badges of honor. In February, commenters on WallStreetBets called themselves “stupid,” “idiot” or related terms 3,550 times, according to TopStonks.com, which tracks stocks mentioned on Reddit and other sites.
Why are traders suddenly bragging about their own ignorance?
Over the past year, as fiscal and monetary stimulus have flooded the economy with cash, U.S. stocks shot up more than 75%.
As of March 23, 95.9% of the slightly more than 3,000 stocks in the Wilshire 5000 Total Market Index had a positive total return over the prior 12 months, according to Wilshire. No other one-year period has come close to that since the end of February 2004, when 93% of stocks had positive 12-month returns.
You could have made good money even with bad stock picks. It was like being invited to bet on black, without limits, at a roulette wheel on which 37 of the 38 pockets were black.
Why waste time and energy educating yourself while sheer ignorance pays off so easily?
What’s more, many traders boasting of their own cluelessness are buying stocks with money they otherwise would have used for gambling.
The expected value of a lottery ticket is generally less than 65 cents on the dollar. Casinos, sports-betting websites and online gaming outfits take less “vigorish” as their cut, but on average the house always wins. Most bettors know that, but no one minds—because the hope of winning is so exciting, no matter the odds.
Now that just about anybody can trade commission-free, gambling on stocks offers a much better chance of making money than other kinds of wagers.
“As far as gambling-style entertainments go, buying a stock is a pretty good form,” says George Loewenstein, a behavioral economist at Carnegie Mellon University. “You can track it over time. It goes both up and down. A stock is much more fun than a lottery ticket, which is static and which assures that you will almost always lose.”
By switching from conventional gambling to stock trading, these speculators are already winners: They get at least as much entertainment value while paying much less to “the house.”
So it can be rational for new stock gamblers not to bother learning about what they’re buying. Research takes time and effort, and if you’re trading stocks purely for entertainment, then “it isn’t clear that getting more information would help you very much,” says Prof. Loewenstein.
Consider Mr. Tran, the TikTok trader, who just turned 22 years old. Last year, he lost his job in the shoe section of a department store in Phoenix. This January, he started trading stocks. “I had money laying around and I was bored and I just wanted to see what I could do with it,” he says.
Does he do any research? “I personally think I’m too lazy for that,” he says with a deep laugh. “When I tell you I don’t know what the f— I’m doing, I really mean it. It’s all just a game to me.”
Within days of his first TikTok video about trading, says Mr. Tran, he picked up more than 100,000 followers. “I just flexed money,” he says. Among his favorite buys: Tesla Inc., cryptocurrency miners Marathon Digital Holdings Inc. and Riot Blockchain Inc., Chinese electric-vehicle startup Nio Inc., AMC Entertainment Holdings Inc. and blank-check company Churchill Capital Corp IV.
“The majority of the time I’m winning, with barely any knowledge, so it’s been a fun process,” he says. “Knowing what you’re doing would always be good, but in this market anything is possible.”
Mr. Tran estimates that he put roughly $2,500 into stocks, which has grown to about $6,500 in less than three months.
That doesn’t count all the rewards Mr. Tran wangled out of Robinhood and other trading apps. As his burgeoning numbers of followers opened new accounts there, referral links showered him with free shares of stock worth a total of about $3,000 as of this week, he says.
“Where ignorance is bliss, ‘tis folly to be wise,” wrote the British poet Thomas Gray. One of these days, perhaps sooner rather than later, stocks will stop going up and the importance of understanding what you own will reassert itself. For the time being, though, investors who used to think of themselves as wise may continue to look foolish.
Write to jason Zweig at firstname.lastname@example.org
Dow Jones & Company, Inc.