Seeing Patterns: Why Some Stocks Can Feel Like a Bet

Investment strategist Doug Cohen from Fiduciary Trust International covered a lot of ground in a recent interview with Quartz. Talking about the volatile world of stocks, especially those related to Trump Media, he highlighted the speculative nature of such investments. How can you tell if a stock is a smart bet or just a wild gamble? Cohen pointed out that a lot of these "meme stocks" are not driven by a company's solid fundamentals. Instead, they are pushed higher by social media chatter and hype. Sound familiar? Remember GameStop's wild ride in 2021? Companies like it relied heavily on internet buzz, not long-term business stability. Cohen also brought up cryptocurrencies in the mix. Much like meme stocks, their value can shoot up (or crash down) based on a tweet or market sentiment. This kind of fluctuation isn't new. Even marquee growth stocks can be caught up in this speculative bubble. So, how can you protect yourself? Cohen suggests a simple strategy: diversify your portfolio. Buy a bit of everything, and if one of your risky stocks pays off, great! But if it doesn't, you’ll still be cushioned by your other investments. Young investors might be drawn to the thrill of a stock market rollercoaster. But Cohen cautions that true investing is about making careful choices based on a company's strength and future prospects. Not about chasing hype or following the latest social media craze. Does this mean you should avoid these hot stocks altogether? Not necessarily. Some could turn out great. But don’t forget, they come with big risks too. Cohen hints at past market bubbles like the internet boom of the '90s. Many highly hyped companies saw massive gains only to crash dramatically. We might not see a repeat exactly, but if market risk tolerance shifts, those high-flying stocks can nosedive. Let's face it, following the steady, reliable path of solid investment choices isn't as exciting as chasing the next big thing. But in the long run, it's what builds a strong economy. So next time you think about joining the stock frenzy, pause and consider what makes a good investment. It’s not just what’s trending right now.