What You Must Know Before Investing in Hyped-Up Stocks
Looking at you, Tesla
The Wall Street Journal recently quoted data showing that Robinhood investors had ‘dramatically increased their holdings’ in ‘shares that have risen the most over the past three months’.
I’m worried — not about missing out on these ‘big winners’, but about getting scammed into giving away my money.
Buying whatever has been going up is not investing. It’s pure gambling.
About 9 months ago, I unloaded a good chunk of my savings into some mutual funds. I had a brilliant, cunning plan: choose the ones that have performed really well. Among others, I picked a REIT fund that paid a fat dividend and an Asian bond fund that hadn’t stopped going up for the last 3 years. Less risky assets, internationally diversified, and pays like stocks? Sign me up.
Fast forward 3 months — every stock market on earth was plummeting, the world was going up in flames, and I made a sweet pile of nothing at all. I lost 10% of my original capital.
I’m not predicting another pandemic. I’m just here to remind you of one of the most foundational yet forgotten lessons of investing, that is also in those disclaimers no one reads:
