Investing ? Avoid popular
Why ‘popular’ is not the best in quality
Cambridge dictionary has this as the meaning of the word popular ; ‘liked, enjoyed, or supported by many people’. Popular is also generally a safer option, something which has to be attractive to a large section of its target group (TG). And that’s exactly where the problem lies. It is built on the foundation of avoiding risk. Popular also stays in the comfort zone. Do a quick check of what’s popular in most fields (particularly your own) and test this hypothesis. Disclaimer : there might be a few exceptions :-).
Popularity and marketing are great partners
The other distinct character of popular is the marketing muscle behind it. Don’t get me wrong. I have serious respect for marketing folks. However, marketing does take your focus, a whee bit away, from a product/service’s intrinsic quality.
Popular in Investing
Popular( which are mostly well marketed) products in investing, can end up being poor choices. As we often state, investing should be BORING. Most investing ideas should take time to grow on you. We live in times, where we know of investment products more for their ads than anything else. Quick reminder: IPL :-).Make no mistake, it’s tough not to get enamoured by them. They have the best of marketing brains behind this.
One reason I still have trouble believing crypto currency is money is that there aren’t commercials for money.
— Noah Garfinkel (@NoahGarfinkel) February 14, 2022
Popularity in investing is a function of recent returns
Good recent return is an easy ‘sell’ and can be packaged well. As we often repeat during our portfolio recommendations, investing primarily based on great recent returns results in sub-optimal outcomes. Tech in 1999, Infra in 2006-07, Equity in general in 2007 and 2021, Mid and Small caps in 2017 are few examples of this.
Most of us suffer from FOMO. It’s only human to do so. That’s one of the biggest reasons why it’s difficult to avoid what’s popular. So what’s some of the quick checks to avoid this in investing ? Be wary if an investing idea is suddenly backed by marketing blitzkrieg, appreciate simple products, look ahead( and not recent returns) and believe in cycles. Last but not the least, see if it fits in your plan of financial well-being. Happy Investing.
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