Financial struggles are nothing new, but some generations are feeling the squeeze more than others. A study by Credit One Bank found that 35% of Gen X and 33% of millennials feel worse off than their parents — far more than the 19% of baby boomers and 17% of Gen Z who say the same (1).

That desperation can lead to drastic measures. In 2020, Alexander Hurst was a struggling freelance journalist scraping by in Paris when the pandemic hit and work dried up. He found his way to WallStreetBets, a Reddit forum where amateur investors were pooling tips and placing high-risk bets and occasionally walking away with life-changing gains (2).

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After reading the forum, he poured $300 from his savings into high-risk options trades. When those early bets paid off, he borrowed money to go bigger. Within a year, he had turned a few hundred dollars into more than $1 million. Then, he lost it all. In his new book, Generation Desperation, Hurst talks about the anxiety that led him to these risky investments.

Hurst's story may be extreme, but as people turn to meme stocks for quick money, there are important things to be aware of. Here's what you need to know before investing in meme stocks or using online advice to guide your investment strategy.

WallStreetBets launched in 2012 as a niche Reddit forum for discussing high-risk trades. By 2021, it had millions of members and became the catalyst for one of the most dramatic market events in recent history (3).

That January, a wave of retail investors on the forum banded together to drive up the price of Game Stock, a struggling video game retailer. The stock shot up by more than 1,600% in a matter of weeks, wiping out several major hedge funds that had bet against it (4). Suddenly, everyday people with Robinhood accounts felt like they could take on Wall Street and win. The event even inspired the movie Dumb Money starring Seth Rogen and Paul Dano.

The appeal is easy to understand. Platforms like Robinhood made trading feel less like investing and more like a game. Flashy graphics, push notifications and one-tap trading removed many of the barriers that once kept casual investors out of the market. And with big-name social media stars on WallStreetBets talking about their big wins, it can quickly trigger the fear of missing out.

What got left out of the conversations was the losses. While some WallStreetBets posters claimed they turned hundreds into thousands, many lost everything. A peer-reviewed study found that retail investors who pile into meme stocks at peak hype saw average returns of -7.66% and lost nearly twice that when they held on too long (5).

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Meme stocks and options trading shouldn't be the foundation of your investment strategy. Here are a few tips for those wanting to invest for the first time.

Only risk what you can afford to lose: If you're drawn to high-risk trades, treat it like entertainment money: invest a small amount you're genuinely comfortable with losing.

Time in the market beats timing the market: This is a common refrain from financial experts. What it means is that a long-term investment strategy will earn more than trying to time the next meme stock. The S&P 500 has returned an average of around 10% annually. That's not flashy, but it compounds over time (5).

Consider low-cost index funds: Index funds give you broad market exposure without requiring you to pick winners. They may not be exciting, but boring, consistent investment strategies are often the most successful.

Don't use investment vehicles you don't understand: While most investing is buying shares in a company (or group of companies), there are also short selling, options and other complex positions that can quickly increase your losses. If you can't explain how it works, you probably shouldn't put your money in it.

Look into CDs: Certificates of deposit are FDIC-insured and currently offering competitive rates. They won't make you rich, but they won't disappear overnight either. They're worth considering if you might need cash in the next few years.

No investment is entirely risk-free. But there's a meaningful difference between calculated risk and desperation. Hurst learned that the hard way, and his story is a reminder that despite the gamification of investing apps, you're risking real money.

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Credit One Bank (1); The Times (2); Business Insider (3); Stat Muse (4); Science Direct (5); SoFi (6)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.