Over the last year, and really since the start of the pandemic lockdowns we saw a pattern emerge. Cultural Trends were spreading like wildfire through society. With the help of Facebook/Meta, Instagram and Twitter hierarchical diffusion seemed to be on steroids. Hierarchical Diffusion is the spread of an idea from persons or nodes of “authority” or “power” to other persons and places. We entered the era of “influencers”, and they were talking about everything under the sun but especially investments. Crypto currency which had once been an obscure topic and that many could generalize about was the hot trend as hundreds of thousands of new ‘coins’ emerged. Further, the novice investor collectively became market movers bringing stocks/companies that were on the brink of collapse to resurrection – just look at GameStop and AMC. This trend has taken on a life of its own and everyone is weighing in. This has never been clearer now that Elon Musk’s offer to purchase Twitter was accepted and the whole world has an opinion. Here is a deeper dive into some of the more pop culture investing trends:
Quickly crypto and blockchain are becoming more mainstream. While I suspect that we will continue to the see the emergence of new ‘coin’, the more often that business is conducted utilizing crypto and blockchains the less it will be considered an ambiguous, foreign concept. The more established ‘coins’ such as Ethereum and Bitcoin are finding their places among Governments and Countries are continuing to adopt their usage. As such understanding of their operations and regulations are going to make them more investor friendly and less risky. For more information on cryptocurrency and blockchain read this recent article from our blog.
The meme stocks have a cult-like following online and novice investors have swarmed to them causing the stock price to become overvalued, allowing investors to see drastic price increases in very short amounts of time. The stocks have increased because of the sheer volume of trading not because of how well the company performs or how healthy their financial balance sheet is. This hype has caused a euphoric, idealistic viewpoint of investing and ‘stock picking’ and many fear this trend will cause investors who bought at the ‘exact right moment’ to become overconfident. Investing in meme stocks is generally very risky.
For us, investing is about risk management; investing for the long-term and taking calculated risks to ensure present and future financial security. Whereas Pop culture investing is more akin to gambling in a casino and betting $500 on black – sometimes you will win, sometimes you won’t. A general rule of thumb is not to use funds that you can’t afford to lose on investing in pop culture investments or taking chances on stocks that the latest TikTok investment expert turned you onto. While some of these stocks have a place in a healthy diversified portfolio, not all do and we urge you to speak to a financial professional to help you navigate the ins and outs of these stocks.