Sometimes it can be enjoyable to participate in the latest
trends in music, food and clothes. But if you regularly follow the
latest investment
”
fads,
”
you might hurt your chances of achieving your long-term
financial goals.
Sometimes it can be enjoyable to participate in the latest trends in music, food and clothes. But if you regularly follow the latest investment “fads,” you might hurt your chances of achieving your long-term financial goals.
Investment fads are nothing new. From the railroad boom of the 19th century to the day trading and the Internet “dot-com” frenzy of recent years, we’ve always had fads. While the specifics of these fads vary, there’s been one constant: People lose their skepticism and get swept up in market hype and euphoria.
What causes stock market fads to take off? In general, three factors seem to be responsible: the thrill of it all, social acceptance and fast-rising prices.
Here are a few suggestions:
– Instead of hopping after today’s hot property or tomorrow’s sure thing, you’re much better off investing in high-quality stocks that may bear fruit next year – and for years afterward. Look for those companies with strong management, solid business plans, good track records and competitive products. If you’re investing in stocks that have historically paid dividends, try to find those that have consistently increased these payouts over the years.
– Instead of going after the latest fad stocks, try to find others that best fit your need for a diversified portfolio. Remember, your holdings should reflect your individual risk tolerance, your time horizon and your long-term objectives.
– Most successful long-term investors follow a well-planned, personalized strategy, often developed with the assistance of a qualified financial professional. If you’ve got this type of plan, you generally know what sort of moves you need to make – and when you need to make them. But if you periodically deviate from your financial “road map” by going after investment fads, you could lose your way.
As an investor, you’ve got a lot to gain by being a little “old-fashioned.”
