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Fads and Fashions
"Following the crowd" is something that we have all been guilty of. But new investors are more likely to "follow the crowd" and fall in love with the latest fad. This is a great risk, and a dangerous one. Newer investors tend to be particularly attracted to fads and fashions in investing. Remember the internet bubble back in the 90s? So many people lost money buying in at the end of the cycle. Of course, those who bought in early made great profits, but these investors often bought in on fundamentals, not hype. As investors, we look toward the "next big thing." Sometimes this motivation leads us right into a Red Alert zone. The investment mess from the internet bubble is just one example. History is full of stories like the Tulip Craze in Holland back in the 17th century. These crazes cause people to follow each other over an investment cliff without thinking, like lemmings on a Science Channel special. Think about the clothing industry and its fashions. History shows that the "latest" trend lasts only a short time. So, while investing in trendy clothing stores may bring short-term success, the failure is often even more spectacular?and inevitable. Typically, by the time we learn about a "new" trend, it's already "so last season". We can even get hurt in fashion trends that are not immediately visible. Oh sure, athletic shoes are every bit as popular as they've ever been. Or are they? Over the past 5 years, hiking shoes have snuck up on the "sneaks" in popularity. That's right, hiking boots and shoes are in; tennis shoes and sneakers are out. But instead of buying stocks from Timberland, think about Nike as a long-term stable investment instead. Anyhoo, it's probably too late to buy Timberland now. The fashion trend has already had its day. But because of this experience we can expect new footwear trends to show up. It may be too late to adapt, it's nearly impossible to keep up, and by the time we figure out where the trend is headed, we've probably missed the stock price rise. So how do we avoid the mistake of buying out of sheer excitement? The answer is simple. Look for companies that are bor-ing. Investing in apparently dull companies can actually be beneficial. Boring companies normally don't have share prices that are puffed-up by mood swings and emotional buying. We're simply buying an income stream - the most affordable way to invest. Also, the company's future prospects are more secure, because they aren't at risk of missing a major shift. Okay let's face it. Owning a firm in Ohio that makes widgets for industrial fasteners is not as "cool" as discussing your ownership of Tiffany's, or the latest nanotechnology corporation in Silicon Valley. But guess what? That widget-producing firm in the heartland will be more dependable, and will probably provide a better return on your money. And isn't that why you're investing anyway? Now, we're not telling you to avoid trends altogether. Trends are important to investing. In fact, if you can get in ahead of the curve, there are great short-term opportunities when you buy in to fads. But here, we're usually playing the "greater fool theory": we assume that someone else will pay more than we did, even when we know it isn't worth it. I mean, many of us made money in the internet days playing this game, but if someone else saw the fad first, we could be wasting our money. There's no harm in buying stocks that might become "popular" in the future, if you can predict future fads, and then sell them after they become overpriced. But to remain sane and safe, stick to companies with solid fundamentals: earnings, stable growth, strong balance sheet, etc. In other words, only buy companies that are good values with good prospects. If a company carries some attraction for fad-followers, so much the better. But don't pay extra just because of the "bling-bling" and the "glam" appeal. Fads and fashions are unpredictable - make no mistake. Don't buy the stock unless you'd want to own it even if your fashion prediction falls flat. If it still looks good - even if your guesses about tastes are wrong - then maybe it's a worthy holding. Successful investing is not just finding profit opportunities, but keeping your losses to a minimum. Don't buy stocks that have no substance. Stay away from the bling! Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S. http://www.valueview.net Scott Pearson can be reached for questions and comments directly at scott@valueview.net or by visiting www.valueview.net.
Latest News:Site: Yahoo! News Search Results for news NBC News announces layoffs; Correspondents let go (AP via Yahoo! News) Several correspondents and other staff were laid off at NBC News this week as part of $500 million in planned cuts at General Electric Co.'s NBC Universal, according to a person familiar with the situation. Scripps puts Rocky Mountain News up for sale (AP via Yahoo! News) The Rocky Mountain News, Colorado's oldest newspaper, was put up for sale Thursday after its owner, E.W. Scripps Co., said it lost about $11 million on the business in the first nine months of the year. Scripps putting Rocky Mountain News up for sale (AP via Yahoo! News) E.W. Scripps Co. says it's putting the Rocky Mountain News up for sale after losing $11 million on the Denver operation in the first nine months of the year. Oil hits near 4-year low on weak economic news (AP via Yahoo! News) Oil prices sank Thursday to lows last seen nearly four years ago as more bleak news from the world's largest economy boosted views that crude could tumble below $40 by the end of the year. Online Money: Fidelity expands online news focus (AP via Yahoo! News) Fidelity Investments is joining the rush to satisfy investors' growing appetite for news about financial market turmoil. Pound slumps after grim British economic news (AP via Yahoo! News) The pound slumped Thursday to a historic low against the euro and to its lowest level against the dollar in over six and a half years after further grim economic news fueled expectations that the Bank of England will slash interest rates later. Weekly world news quiz (BBC News) At the end of another week, test your knowledge with our world news quiz. UPI NewsTrack Entertainment News (UPI) Mark Ruffalo's brother shot in the head ... Coldplay, Adele earn top Grammy nods ... Oprah taking show to D.C. for inauguration ... Anne Heche expecting 2nd child ... News from United Press International. Scripps puts Rocky Mountain News up for sale (Detroit Free Press) DENVER ? The Rocky Mountain News, Colorado's oldest newspaper, was offered for sale today after owner E.W. Scripps Co. said it lost about $11 million on the operation in the first nine months of the year. 57% - TV Still King of News (Pew via Yahoo! News) On any given day, more Americans turn to TV for their news (57%) than any other source of media, a rate that has remained largely stable over the past 10 years (59% in 1998). In contrast, the percentage of Americans reading a newspaper on any given day has fallen to 34%, down from 40% just two years ago and down from 48% (a 14-point drop) a decade ago. Site: news - Google News New Voices in Congress Will Change the Tone of the Democratic Majority - New York Times
MORE RESOURCES: Site: Yahoo! News Search Results for fashion style Fashion: Style Network host has a passion for fashion (Post-Bulletin) Finola Hughes, host of Style Network's "How Do I Look?," has always been a fan of fashion. "I grew up in London. It's such a fashion capital. There's so much street theater. You go out on the street and just wal Stacy solves your winter style issues (MSNBC) Have a clothing crisis this season? Wondering how to belt your sweaters or tuck jeans into your boots? Have no fear. TODAY style contributor Stacy London tackles some of your burning fashion dilemmas. Fashion Experts to Students: Stay Focused, Take Risks (Fashion Wire Daily via Yahoo! News) For students of fashion wondering what it takes in the current economic climate to survive, whether they're considering a career as a designer or in retail, the consensus amongst a handful of the fashion industry's competitive players at a fashion roundtable event hosted by the YMA Scholarship Fund and sponsored by DOW XLA on Tuesday, Dec. 2, is that it requires focus, creativity and ... Life & Style: Funky Islamic Fashion Struts Conservative Catwalk (Sin Chew Jit Poh) Breast cancer survivors as models showcase creations by Rozi of Kraftangan Malaysia during the Islamic Fashion Festival in Kuala Lumpur, Malaysia. (Photo courtesy: AP Photo/ Lai Seng Sin, File) In Fashion Photo brings style to Art Basel (Miami Herald) Fashion lovers may want to head to the second annual In Fashion Photo, an exhibit featuring some 250 works by more than 35 top fashion photographers, including Slim Aarons, Miles Aldridge and Bettina Rheims. Islamic Fashion: Creatively Conservative (CBS News) After years of turning heads with her riotously colorful frocks in Malaysia, fashion designer Tom Abang Saufi can't decide whether to shed a few shades on her batik dresses for the Middle East. HTC buys design house to accent smartphone style (Reuters via Yahoo! News) HTC, maker of the new Google Android G1 smartphone, has bought design consultancy One & Co to tap its fashion expertise in everything from furniture to snowboard boots. Camilla puts another feather in her fashion cap at medal ceremony (hellomagazine.com via Yahoo! UK & Ireland News) The Duchess of Cornwall cut a striking figure this week as she joined her husband Prince Charles at a ceremony honouring soldiers who have served in Afghanistan. The 61-year-old royal, who continues to impress fashion pundits with her elegant sartorial style, made a bold statement by topping off her outfit with a beret-style cap, adorned with an emerald green feather. Katy Perry: "I'm Definitely Going to Be on Worst-Dressed Lists" (US Weekly) Katy Perry to Us Weekly's fashion police: bring it on! "I'm definitely going to be on the worst-dressed lists," she says in the newest issue of Page Six magazine, which hits stands Dec. 7 in the Sunday New York Post. See the worst dressed stars of 2008! "I just want to have fun," she says of her style. "I don't take my life too seriously." But, "as much as I am cheeky and full of opinions,... ... Men's Style: Wardrobe mistakes and essentials (Westerly Sun) Beauty and fashion expert Rita Guido of Westerly offers great ideas for a man's wardrobe - just in time for holiday gift giving. Site: fashion style - Google News US Fashion?s One-Woman Bailout? - New York Times
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