These meme stocks are, 'generating some bad habits, actually a gambling habit, for many investors': CEO of Ty J. Young Wealth Management

CEO of Ty J. Young Wealth Management, Ty J. Young joined Yahoo Finance Live to break down the long term impacts of the meme stock revolution.

Video Transcript

- So let's bring in Ty Young. He is CEO of Ty Young Wealth Management. And a lot of people-- we talk about generational trends, but there are a lot of people who are not necessarily millennials who might be making some big mistakes, especially when it comes to meme stocks. And I'm going to pull up-- I don't know if we can pull up AMC right now, Ty. But AMC is down 12% today. So when you talk about risking it all, some of these younger investors may not know what it's like to get burned, do they?

TY YOUNG: You know, that's right. All they've ever experienced is a huge up-market. And these meme stocks, there's some tremendous returns that a lot of people have achieved. But what's happening is, it's actually generating some bad habits, actually a gambling habit, for many investors, which can be problematic.

- Ty, is this like anything that we've seen before? I mean, we've talked about this craze in meme stocks recently. Obviously, the impact that it's having specifically on millennial investors who are jumping in for the first time. Can you equate this to anything that we've seen in the past?

TY YOUNG: You know, not really. This movement, along with social media and the availability of information, has more investors, more young investors getting involved in the market way sooner. Plus, with their exposure with 401(k)s and IRAs, they're more familiar with the market than they used to be. So we haven't seen this, or I've not seen this in my career, as I look back and study the past.

- Familiarity may not equate with wisdom. I mean, a lot of us who've been maybe funding 401(k)s or doing some stock on the side approach it differently. Perhaps even more of us who are older might be passive investors, whereas these younger folk tend to be more active investors. What mistakes do you see them making right now, and can they correct them before it's too late?

TY YOUNG: They absolutely can correct them, but here's the mistake. The mistake is that they take the gambling, the gambling habit that they have from the meme stocks and buying Bitcoin and those sorts of things, and those habits translate. The problem is they can translate to their IRAs and their 401(k)s and their retirement dollars. And if you do that, if you allow yourself to do that, and you lose a great deal of money in your retirement money, in your real money, that can be very, very discouraging, having to build all the way back up several times. You can cause people even to quit.

So the trick is to keep-- if you're going to take a great deal of risk, only risk it with money that you can afford to lose. The real money, the retirement money, the 401(k)s, the IRAs, the money that you're putting away to provide you income in retirement, that needs to be in a place where it's earning a reasonable rate of return. Risk is minimized, and fees are minimized as well.

- Ty, another big craze that we've seen, or a trend, I guess you can say, over the last several months, is this SPAC boom. More and more companies are going this way versus a more traditional route when they go public. I guess, do you see, or how should investors be thinking about SPACs when they're thinking about their portfolio allocation?

TY YOUNG: It's risk. To me, what a SPAC is essentially raising venture capital money. It's not really that. But to me, it's like venture capital money that they're raising through an initial public offering to go out and buy very speculative companies. Well, very speculative companies come with a lot of risk. There's possibilities for return, but a lot of risk. So that would fall into the category of the high-risk investment, for money that you're OK losing or that you're willing to lose, not the long-term retirement money.

- The questions that the people, say, 35 and younger who walk through your door, come to your office ask, do they ask a lot of questions? It seems as if the discussion has gone from SPACs to crypto. Are they asking a lot about crypto?

TY YOUNG: They are asking a lot about crypto. I get that question all the time. True story, guy walks in the office and he says, "I want to buy Bitcoin." And I say "you want to buy a cryptocurrency?" And he says "what's a cryptocurrency?" The point is, a lot of folks don't really know what a cryptocurrency is, or the inherent risk that goes along, even though there's huge swings. They want to see that.

But ultimately the question they ask me is, what does a winning retirement strategy look like? They come to us because they want to have long-term success.

So that winning strategy, we call it the three-legged stool. You've got to have the leg of income. You got to be able to take income from your investments, from your portfolio in the future. You've got to have growth to build the portfolio, and then to support the income. And then you've got to have protection. Protection against a black swan event that we know is going to ultimately come. Historically, it does. The crash in '29, the real estate bubble burst in 2008, and then the COVID crash came. So you've got to protect it. But a winning strategy has all of those tools.

And the nice thing about a millennial, they have something Warren Buffett doesn't have, and that's time. They have time. Millennials between 24 and 40 years old, so they have somewhere between 20 and 40 years to grow their money. Well, you can double your money every 10 years earning a reasonable rate of return. That is a lot of power of compound interest over time if your portfolio is set up with the strategy where you can win. Very, very important to take advantage of time.

- They have time, but no time if they're stuck in traffic on Georgia 400 as they head into your office on the north part of the great city of Atlanta.