Salvador Vergara was so excited about GameStop Corp. in late January he took out a $ 20,000 personal loan and used it to buy shares. Then, the stock moved fell by almost 80%.
GameStop’s volatile journey is hitting the portfolios of individual investors like Vergara, who bought the shares in a frenzy fueled by social media. These casual traders say that GameStop was their “YOLO” or “you only live once” trade. They bought around the peak of late January, betting that they would continue their astronomical climb. While some cashed out before the crash, others who kept their shares are in the red.
Vergara, a 25-year-old security guard from Virginia, started investing four years ago after deciding he wanted to retire young. To save money, he drives a 1998 Honda Civic, eats a lot of rice and lives with his father. He hid his savings mainly in diversified index funds, which are now valued at around $ 50,000. Then Mr. Vergara, a longtime reader of the WallStreetBets page on Reddit, saw others posting about buying GameStop shares and the colossal increase in shares.
He didn’t want to tamper with his investments in index funds, so instead he took out a personal loan with an interest rate of 11.19% from a credit union and used it to finance most of his GameStop purchase. . He bought shares at $ 234 each.
GameStop shares started the year at around $ 19, skyrocketed to nearly $ 350 (and nearly hit $ 500 in intraday trade) in late January, and then began to spiral back to earth. The stock closed Friday at $ 52.40, down 85% from the peak close.