Trends come and go in every aspect of life, including the markets. Trends spike media attention and huge amounts of public interest– everyone looking for a get rich quick solution. Now in vogue is marijuana and cryptocurrencies. Wanting to be part of this, or other trends, is fine but here are some pointers to keep in mind while trying to ride the wave.
The greater fool principal
Essentially, this means buying into something risky and uncertain with the hope that down the road, it will sell it at a higher cost than it was purchased for to a greater fool. This is the case for cryptocurrencies, like Bitcoin. No one is intending to hold onto it, rather to buy it up and then sell it off when its market valuation shows greater worth. It is more of a game of timing than it is an investment strategy.
Sky high valuations
Trendy investments tend to carry huge valuations that do not always make sense. Take marijuana stocks, in Canada the value of shares are huge, especially for companies who have yet to turn a profit. The attention, rather than the value, is what is driving up stock price in what can easily be an artificial market.
Pushing the boundaries affordability
When a share is hot, the price is high and the media is talking about it, it creates a perfect storm of temptation for an investor to buy quickly. The issue with this is that many investors end up pushing their traditional boundaries of what they consider affordable because they want to get in the game at any cost. The result, dangerously, is often extremely overpriced eggs in one flimsy basket.
There is success in boring
There is a reason patience and diversification seem to always win in the investment field. There is no instant solution to getting rich and if there is, it probably lacks longevity. There is value in getting rich slowly and steadily, that may just win the financial race.
Want to learn more? Check out or perspectives section (link) where we dig deeper into the markets on a monthly basis.