Chasing Heat
Bitcoin and other cryptocurrencies have generated headlines of parabolic returns; “get-rich-quick” stories have been common with stocks like GameStop and AMC; high-flying tech IPOs have generated massive investor subscription; SPACs are all the rage on Wall Street. For many investors following the financial news, it can appear that millions are being made everywhere. That can tempt investors to want in. History tells us that getting baited into ‘hot’ asset classes can – and eventually will – catch-up to investors. For one, bubbles can burst frequently and with no notice. The tech bubble of 2000 bankrupted many investors who put everything in dot-coms, and overcommitting to asset classes like bitcoin – or individu-al stocks like GameStop – leave investors vulnerable to similar outcomes. At the end of the day, remember that most investors do not need to make +400% returns in a week, or a month, or even over five years in order to reach long-term goals. More often than not, consistent, equity-like returns over long (20+ years) stretches of time can get the job done. Key Takeaway The get-rich-quick appeal of cryptocurrencies or hot stocks can make investors stray from their long-term investing discipline. When it comes to building your retirement nest egg, long-term growth and volatility minimization are the most important goals, in our view. Don’t compromise those goals by giving into “FOMO” (fear of missing out).