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Even if you're not into investing, chances are you've heard about how a group of redditors

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have driven up the stock price of the venerable GameStop GME in order to troll a bunch of

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hedge fund managers. Although this is tech-quickie, not cash-quickie, we are going to give you a brief synopsis

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of the situation for some context and then talk about the tech side of things to better

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understand how this happened. So the reason GameStop was targeted was because it's a heavily shorted stock.

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Shorting a stock is a high risk but potentially high reward play that works like this.

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You pay a fee to borrow a stock from the owner, then immediately sell that stock, like that

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day. You do eventually have to return the stock to the owner, so by shorting it, you're betting

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that the stock will go down in value, allowing you to buy it back later for cheaper than

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you just sold it for, giving it back to the original owner and keeping the difference

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in the price you sold it for and the price you bought it back for, minus fees and interest.

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GameStop is often shorted because with video game distribution becoming digital, GameStop's

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more brick-and-mortar business model has seen as something that could fail in the near

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future, you know, kind of like blockbuster.

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But as we said, shorting is very risky, since if the stock's price goes up instead of down,

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you have to buy it back for more than you originally paid for it, sometimes a lot more.

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And as more and more people buy back a shorted stock because they're panicked about the

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price rising even more, it just keeps driving the price up even more.

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Because of this risk, stock shorting has become associated with hedge funds, which typically

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make high risk but potentially lucrative investments for organizations or for wealthy

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individuals. And some of the risky plays they've made have hurt the US economy, meaning that they're

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not very well liked. Combine that sentiment with a feeling that GameStop might be undervalued and the rush

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was on to buy GameStop shares, drive up the price, and force short sellers to buy the

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stock back in a panic, making GameStop an even more lucrative investment, at least for the

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short term. Okay, so we've explained a bit about how short selling works, but how were a bunch

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of individual investors on Reddit able to beat these powerful hedge funds with millions

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dollars even bankrupting one of them? A huge part of it is how online services and apps have made investing far more accessible.

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Instead of calling up a broker and using traditional trading software that assumes the user is already

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familiar with investing, newer financial tech, or fintech firms such as Robinhood, which

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we'll talk about more in a little minute here, have tried to make opening up investing

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to the masses with easy to understand interfaces a core part of their business models.

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There are also companies that specialize in what's called robo-advising, an algorithm-based

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approach to investing for those who don't know much about investments or simply don't

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want to have to manage the details themselves. Typically, you tell a robo-advising service such as Betterment or Wealthfront what your

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investing goals are and how much risk you're willing to take on.

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And then the algorithms invest your money for you, rejiggering things on the fly depending

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on what the market's doing and oftentimes even making tweaks that can reduce your liability

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come tax time. Robo-advisors also have cheaper fees than traditional brokerages due to lower overhead,

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helping these services take off big time over the last few years, with many managing tens

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of billions of dollars in combined assets.

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And even though the aforementioned Robinhood doesn't offer robo-advising, it's easy interface

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and no commission trades have made it very popular.

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But you might also have heard that Robinhood has had a lot of ire directed at it recently.

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After the game stopped short squeeze we described, Robinhood made the decision to restrict trades

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involving GameStop stonks, as well as other stocks redditors were targeting.

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Robinhood reportedly did this to limit its own risk in the event GameStop's price collapsed.

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But the move was extremely unpopular, triggering lawsuits, accusations from investors that they

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were colluding with hedge funds, and even statements from both Republican and Democratic

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politicians wondering why hedge funds were able to trade securities that individual investors

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suddenly couldn't. Wow. It looks like activist investing actually did something.

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I wonder if we can rally tech quickies fanbase to pump up the value of lttstore.com, but first

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we need to go public. So thanks for watching guys, if you liked this video hit like, hit subscribe, and hit

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us up in the comments section with your suggestions for topics that we should cover in the future.