Stock app adds ‘risky’ label to some shares
TORONTO • Canadian investing app Wealthsimple adding a ‘risky’ label to certain stocks after a social media based movement sent shares of Gamestop, Blackberry and others soaring up to 1,700 per cent.
The Gamestop stock page on Wealthsimple’s app advises users that the ticker, GME, is considered risky and that traders should expect high volatility.
The Toronto-based robo-adviser, whose motto is “get rich slow,” suggests that investors who want to trade the stock place a limit order with a set price.
AMC Entertainment and Blackberry stocks also carry a warning on the app after prices whipsawed this week, posting steep gains or losses from day to day.
Wealthsimple, owned by Power Corp. of Canada financial conglomerate, has said it will not restrict trading on certain securities, after Td Bank said it would increase margin requirements for short-selling and uncovered options of Gamestop, Express Inc. and AMC Entertainment Holdings Inc. on the New york Stock Exchange.
But Wealthsimple chief investment officer Ben reeves said on the company’s website followers of the Gamestop frenzy could end up being worse off from the trend, adding that trading based solely on online forums is a “pretty lousy strategy.”
“If you have a disproportionate amount of your money in a single stock, I would be concerned for you. If your position is small and you are doing this for fun, I’m not too worried, even if you don’t have a great trading strategy,” said reeves in an article on Wealthsimple’s magazine website.
Earlier this week, Wealthsimple said it had seen “incredible growth” on its platform steadily for months, and that the most popular stocks recently have been Tesla, Air Canada, Shopify, and Apple.
On Thursday, reeves said that Gamestop’s volatility this week will hopefully be “a learning experience that’s not too expensive” for investors.
“Is ‘I am buying because the stock has gone up a lot” really your trading strategy? And if so, is that a viable and repeatable one? I’d argue it isn’t for most individual investors,” said reeves in the article. “Either way, the other question is: do you have criteria for when you will get out?”
A statement from Investment Industry regulatory Organization of Canada said the regulator is “concerned” about the impact the increased volatility may be having on some investors, pointing to its use of single-stock circuit breakers, which “are designed to give the market a pause” when a stock moves suddenly.
The regulator said it is important for investors to avoid “betting the farm” on inaccurate or misinterpreted investing information, referencing a bulletin released this fall to help investors.