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Brian Lehrer: Brian Lehrer on WNYC. Again, Mayor de Blasio coming up at 11:30 this morning. Until then, the recent rollercoaster ride on Wall Street continues this week. The Dow surged to a record high on Wednesday, then yesterday there was a meaningful decline, especially among tech stocks on inflation fears and some other news. People are still shaking and continuing to count their gains and losses from a few weeks ago when a group of individual investors on Reddit tried to take down the hedge funds by investing in GameStop, and Bed Bath & Beyond, and AMC movie theaters and other stocks that were supposed to go down.

One major outcome of that was a lot of young people were introduced to the idea of retail investing. What are the lessons from the ongoing rollercoaster that people are learning can go down and make your shriek with terror, just like the rollercoaster can go up and make you howl with irrational exuberance? Joining us now for a few minutes, Michelle Singletary, she's the Washington Post personal finance columnist and author of The 21-Day Financial Fast. One of her recent pieces is called GameStop holds a financial lesson for kids: Investing is supposed to be boring. Hey Michelle, welcome back to WNYC.

Michelle Singletary: I'm so glad to be back, thank you.

Brian: First, bring us up to date since this has fallen out of the non-business headlines. What's happening with GameStop and those other couple of stocks, are they still volatile? What's going on?

Michelle: It's still volatile. Great day yesterday, the stock surged again, but I think it's just another reminder that what people are doing is really not patient investing, the kind that we teach, it's speculation. If you got extra money and you can say, "Hey, if I lose it, fine, if I win, great." Then okay, have some fun, but generally speaking, this is not the kind of investing that is going to make people wealthy and secure in their retirement. It's just like you going to the casino and you're pulling down the little slot machine handle. It's fun right there but if you want meaningful wealth, you want to build the wealth over time for your retirement, send your kids to college, this is not it.

Brian: We can take a couple of Wall Street and investing questions for Michelle Singletary, especially if you're new to this. Did you have experience through Robinhood or any of the other portals in recent months as a new investor, and what have you learned from this that has either sobered you or maybe not sobered you, maybe you're cool with all these ups and downs, and you have a new thing? 646-435-7280, 646-435-7280.

GameStop was different, Michelle, I think as an example of people working together to make a big change in the market on an individual stock when investing isn't supposed to be that way. It's everybody making their best bets on individual companies, or index funds, or whatever, and yet there was this kind of group or collective movement here, which is very unusual in investing history, right?

Michelle: Right. I understand what happened, it's really complicated, folks, but it's all  

about short selling and fund managers betting that the stock will go down and profiting from that. Some investors, that's just not their-- There are lots of individual investors, people who may not be in the market who feel like the system is rigged against the regular person. This was a protest against that. It was probably a legitimate protest, sure, go for it. What my concern is that now you've got people, you've piqued their interest, but you don't follow through to say, "Hey y'all, this is just a protest. This is not how you should be investing."

I can tell you this because my nephew don't live in New York. [laughs] For the last two weeks, my nephew's been sending me these stock tips about these penny stocks, "I got in, and it went up to $16, and now I'm out." I've been trying to tell him, as the older aunt, "Honey, this is not what you should be doing. First of all, I need you to get out of debt, I need you to pay some things off, build up your emergency fund, patiently invest in a retirement fund for yourself down the road." He's having some fun, and I'm going to let him have some fun but in a couple of weeks, I'm going to be sitting down with him and saying, "This is how you do it."

It's so funny because there's a group chat with my nieces, and my children, and my husband, and so I just sarcastically went back, "I don't know, I think I'm a pretty sophisticated investor. I sent three children to college debt-free by investing in a very boring thing called a 529 plan." Here he is trying to tell me about these little stocks. I'm like, "Baby, no." [laughs]

If it introduces people to investing, I love that, and lots of young adults are saying, "Hey, what's this thing?" Now, I need them though, to understand that there's two different things going on. There's the protest, which is not the type of investing that is going to do you some good long-term. Then there is, "Hey, I've got you interested. Here's how you actually can become a 401(k) millionaire and sustain it." That's the road that I'm hoping people will take.

Brian: Jeff in Union, you're on WNYC with Michelle Singletary. Hi, Jeff.

Jeff: Hi, thanks for taking the call, love the show. I have started basically investing during the pandemic, I had a bit of extra money early on, and it was just a fundamental like, "These stocks are very, very low. I'm going to buy some blue-chip stocks that I've heard of, that I believe in." I've done fine. I don't necessarily understand the speculative side, but I do understand the idea. I feel like some of these people believe in GameStop for some reason and want it to work, and I understand that impulse. That's all, that's my experience. Thank you so much.

Michelle: I'm not sure that's true. I think they believe in the protest because you need to look at the underlying business. They've got brick-and-mortar stores, are they going to be sustainable? People are still staying away from the mall. If you look at the fundamentals of the business, that's really how you should be investing. I would ask you, I'm assuming you've got your emergency fund, I'm assuming that you're investing for retirement. I can't tell how old you are, I don't know if you have children, are all of those things in place?

Brian: He's not on the line anymore, he went.

Michelle: He's gone. If all of those things are in place, then his little foray into buying, I heard the stock kind of thing, okay, fine, but for the most part, regular folks-- low index funds, dollar-cost averaging means you select the amount of money every month and you put it into the market. That is really the way you should be investing. I don't want to poo-poo on people's fun, but sound investing that is going to do you well long-term is boring, it's not what's happening right now.

Brian: To the extent that it was a protest, there certainly have been social investment funds for a long time, where people try to express their values, and even help effect community change through what stocks they will invest in and what stocks they won't invest in. What's the difference?

Michelle: With GameStop, is more of a protest against those who were shorting the stock. What you're talking about is socially conscious investing. You want to make sure that you're investing in funds, index funds, companies that, for example, pay attention to their environmental footprint, that maybe don't invest in tobacco or products that you don't agree with, that's far different.

That kind of investing would still be, what I talked about, you'd figure out what funds align with your values, and you would invest in them, and you put money in over time, and build up. That's absolutely fine. It's still the exact kind of investing that I talked about. What you're seeing with those stocks, which have nothing to do with the underlying principles of the business, it's more of a protest, that is not really investing, that's speculation,

Brian: Sachin in Los Angeles, you're on WNYC with Michelle Singletary. Hi, Sachin.

Sachin: Hey, Brian, a big fan. I had a couple of observations. There's a big theory that the stimulus money that's going in, especially with millennials, they're putting all that stimulus money into the stock market, so that's bumping it up. The second piece is, it's interesting when I look at Tesla and Bitcoin also, there's definitely a speculation component to it, but I also feel like, especially among millennials, that is almost like a brand concept of it. It's like an iPhone, or a Nike Jordan, and then being able to buy it from a fractional perspective, so you're not even buying the entire share, that to me is also driving how this market is so speculative and high prices.

Brian: Sachin, thank you very much. Michelle, he's gone.

Michelle: Thank you. The studies show that people are not taking their stimulus money and investing. [chuckles] That's really what people are-- because a lot of young adults actually, especially, if they're in college, didn't qualify for the stimulus payment anyway. The people who are getting stimulus payments, they're doing what they need to do; paying rent, buying food, the vast majority of people are doing that.

They're just living, and trying to use that money to get by. There are quite a few people, many people, who are actually taking that stimulus money and saving it. They're worried about their job, they're not sure what's going to happen, and they're putting it aside to say, "Hey, I'm not sure what's this economy doing." In terms of young people investing, again, I think it's great that they're interested, just make sure  

you understand that what you're doing with those stocks, the GameStop, those kinds of things, is not the kind that was going to build wealth for you over time, they're very volatile, and that's speculation.

Just a regular old boy growth index fund, and really for young adults, if you are in, say, you're just coming out of college, you have a ton of student loan debt, the best investment that you can make for yourself is to get out of that student loan debt, and then patiently invest, which is what we talked about earlier in the segment about dollar-cost averaging. That is what's going to create the real solid wealth that you're going to need down the road.

Brian: We have one more minute to finish up before we go to our weekly Ask the Mayor segment with Mayor Bill de Blasio. I want to switch gears just a little bit because tax season is upon us. You also wrote recently, "The 2021 tax season could get ugly." What did you mean by that, and what should people do?

Michelle: Because of the pandemic, IRS is just under siege with so much work. They are still processing millions of 2019 returns. Anyone who's had an issue, tried to call the IRS, you know you can barely get through if you can get through, and then there's still a lot of questions about the stimulus payment.

Many people feel like they don't know that it's not tax. The stimulus payments you've received are not taxable income, or so many people file for unemployment benefits for the first time, maybe didn't have taxes taken out. Your unemployment checks are taxable. They may get a surprise tax bill when they file their 2020 return, where in the past they've gotten a refund. There's going to be a lot of things going on. I need people to follow electronically if you can, do not send a paper return, it's going to go into some abyss right now because the IRS is still far behind, and we all know that the post service is very slow.

Just file as soon as you can, get help. If you make $72,000 or less, you can do free file, so you can get your federal taxes done for free. Go to irs.com. Don't Google it, go to irs.com. Not .com, irs.gov. On the homepage, you'll see Free File which will help you file your taxes for free. AARP has a tax aide so that if you need some help with preparing your taxes, you can contact them. If you go to washingtonpost.com and type in my name, a lot of these columns will come up that'll walk you through some issues when it comes to the 2021 tax season.

Brian: Washington Post Personal Finance columnist, Michelle Singletary, who is also author of the book, The 21-Day Financial Fast. Michelle, thanks so much.

Michelle: Oh, thank you for having me.

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