Trending Investments

It’s challenging to escape the noise of a bustling market, where the 24/7 news cycle on trending investments often dominates the mainstream media. This relentless coverage makes it difficult to ignore the constant hype around the next big opportunity.

Even the most prudent investors can be tempted, but their temptation is tempered with the skepticism of experience. How do you, somewhat less experienced but not risk-averse, avoid the trap of following the trends?

Stay steady, stay informed, and stay focused on your long-term goals.

The Pitfalls of Chasing Trending Investments

What makes a trend? A promising new technology, better than expected growth in a given sector, or, worse, the fruits of an intense marketing campaign?  How do novice investors identify risky trends?

FOMO

Perhaps the most insidious risk in chasing trends is FOMO — fear of missing out. It's easy to let your emotions take over good judgment when you're convinced you're missing out on the next unicorn. Remember that rising prices inevitably fall.

Timing

Another pitfall of FOMO investing is timing.  Rather than knee-jerk investing in the latest and loudest, research how the most recent sure things are doing — chances are strong initial investors sold for a loss. Wait and see how an investment performs before buying in. Long-term, waiting is a better plan.

Diversity

A balanced portfolio is the key to long-term success. If you're chasing the hot new things at the expense of diversification, you're increasing your risk exposure and slimming your cushion against the inevitable market slowdowns. The point of diversification is that you can ride out the bust markets with limited damage to your overall portfolio.

Focus on Strategy, Not Trending Investments

Savvy investors develop a strategy to collectively balance their financial goals, risk tolerance, and time frame. Focusing on trends diverges from a strategic plan, and too much straying can turn a well-thought-out plan into a sector-heavy mishmash.

Investment strategy is not static. Review your plan regularly and make adjustments as needed. Remember that all markets correct from time to time and that, overall, you see strong gains over time. Long-term investing that takes advantage of compounding growth is a better strategy than hopscotching from trend to trend.

A financial advisor can help you reduce the volume in a noisy market and keep you focused on your long-term goals rather than the daily ups and downs that are rarely indicative of real market movement.

A significant benefit of working with an advisor is that you become educated in finance and investing so that you can make more informed decisions. You'll also learn to identify market cycles and asset classes that are key to your financial planning. The more you understand the fundamentals of the market, the less likely you'll fall prey to trends.

Am I Letting Market Noise Drive My Investment Decisions?

Before you respond to the siren call of a trending investment decision, take a deep breath and ask yourself, "Is this a decision that aligns with my long-term strategy? Does it boost my diversification or put me at greater risk?"

There is little downside to slowing down and considering all the facets of trending investments. If the purchase is truly a long-term asset in your portfolio, waiting a few weeks will ultimately have little impact on your net worth.

Stay disciplined in your investing decisions to minimize risks. Don't rely on the media for critical information. Instead, focus on investing for the long term. Working with the team at CrossleyShear Wealth Management team, for example, we’ll design a portfolio mix that helps weather the inevitable ups and downs of the market.  Reach out to us today to learn more about our long term comprehensive financial planning approach.   

Any opinions are those of Dale Crossley and Evan Shear are not necessarily those of Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  The information contained here does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Past performance may not be indicative of future results.  Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification.  Prior to making an investment decision, please consult with your financial advisor about your individual situation.