Personal finance expert, Suze Orman joins 'Influencers with Andy Serwer' to discuss the rise of retail investing.
ANDY SERWER: You mentioned, the stock market before, and some people have suggested that all this cash has been fueling things, like the GameStop frenzy. What's your take on that?
SUZE ORMAN: Oh, my God, those are two different things. I think the GameStop frenzy was just crazy. I think it's crazy, and I think some people, obviously, made a lot of money. But the majority of people, as you, again, may know, entered GameStop at $320 a share, and do you think they sold?
And then you had personalities, famous people, coming on, saying, do not sell the stock, as the stock started to go down from $400 to $300 to $200. Don't sell. Like, really, everybody? So GameStop, I think, is just stupid. And I understand the philosophy behind it, and the short squeezes, and everything. That's not investing.
You don't invest in somebody or in something, because you figured out a way to squeeze them. You invest in a company, because you like the company. You like their management. You like their potential.
They're ethical. They're honest. They have growth. They can help this world. Now, maybe GameStop will turn into a company that's fabulous in the long run.
They have a lot of things that they're working on now, but that wasn't an investment. That was a game, and that game needs to stop. I don't think, however, that the stimulus checks really are what fueled this stock market.
I think really low interest rates and what else do you do with your money fueled the stock market. I think being able to buy slices of stock at no commission fueled the stock market. I think you have millennials out there that were like, oh, my God, look what I can do through, whether it would be Robinhood, or Charles Schwab, or whatever the companies are that they could do it with no commission.
I think that fueled it. I think people not knowing what to do with money fueled it, and I think it was the fear of missing out. It's like, oh, my God, look at this. What do you want to say, boyfriend?
ANDY SERWER: FOMO. Hey, so you mentioned Robinhood. And I wanted to follow up on that a little bit and drill down, Suze. Because, on the one hand, it makes markets accessible. On the other hand, it may draw people into risky things they don't understand, so I'm wondering what your take on Robinhood is, for instance.
SUZE ORMAN: The very first time when Robinhood, a while ago, kind of closed down their trading, and they weren't able to stay open, I think it was a year ago or so when the pandemic was having those things. I was like, I'm off of Robinhood. That's it. I'm out of there.
Not that I ever had an account there, but it's like, no, I wouldn't be doing that. Because you need liquidity. You need to be able to get in. You need to be able to get out.
I also thought it was very irresponsible of Robinhood to allow certain people. You know, there's know your customer rule, where customers that were able to risk money on GameStop and so forth. OK, but what if they weren't? Like, did you have your know your customer rule in place?
Did you have a disclosure that said what you're doing? You absolutely could lose all of your money. Do you understand that, yes or no? Consumers need to be protected.
Young investors that think they know what they're doing need to be protected. I think probably, though, the greatest lesson that some of those people learn was especially, if they were really young, Andy, is that they lost money. Because investing isn't about just making money.
Investing is about understanding what you're investing in and doing it over the long haul. And the amount of money-- imagine if you had bought Apple when it first came out, Amazon when it first came out. It wasn't a trading game. This is an investment game, and you invest with your money, just like you invest in a relationship. You invest and say, I do for the long run, for the rest of your life, not just for a month or two, although, many people do.
So maybe they learned. I think the most dangerous thing is when people get into the stock market, and all they do is make money. It goes up and up. And it's like, oh, this is easy. I'm going to take my student loans. I'm going to take this. No, losing money and watching the market go down is one of the greatest lessons an investor could experience.