Watch for fads
The securities market sometimes gets caught up in a wave of investor enthusiasm for a certain type of investment. This happened with technology stocks in the late 1990s, with disastrous results for many investors when the bubble burst.
When you ignore your investment objectives and financial needs in a quest to catch the wave, you can over-concentrate your portfolio in one asset class. This exposes you to the risk of big losses that you can avoid simply by keeping your portfolio diversified. The result can be devastating, especially if you invested in the fad in the hope of making up for previous losses, supplementing your income, or better funding your retirement.
Never believe anything that’s said to be a sure thing, even if it’s being touted in the media and by so-called financial experts. You should always feel comfortable with your investment decisions, so pay attention to your 'spidey sense' if something doesn't feel right. An investment that's right for someone you know won't be right for you if it doesn't fit your financial goals and risk tolerance, so don't get caught up in the excitement that investment fads can generate. Do your homework. Talk with your advisor. And remember: the way to make money is to invest at a reasonable price that reflects the investment’s value and to sell it later, often much later, at a higher price.
For more information, watch the InvestRight podcast on the InvestRight YouTube page, Risky investment FADS.
Also, see our Investor Watch: Making informed decisions during market turmoil.
More about Investor Watches
From time to time, the BCSC will issue an Investor Watch. These are in-depth articles about investment products or practices that we want investors to be concerned about. They may include additional information beyond what is included on the relevant product page in Investright's About investments section, they may cover products not discussed in that section, or they may cover dangerous activities or steps you can take to protect yourself. In any case, investor watches are worth paying attention to.
Investor Watches about popular investment products
- Investor Watch: Inverse and leveraged ETFs
- Investor Watch: Investing in private companies
- Investor Watch: What is Forex?
For other investor watches, visit our News section and click on the Investor Alerts and Investor Watches blog.
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