There are also fashionable trends in investments that keep things moving. Investors should not allow themselves to be influenced here, stick to their strategy and, above all, spread risk intelligently.
Short-term trends can be profitable – let us remind you of the dot-com bubble – but also involve the risk of not getting out in time and losing the nice profits again. On the other hand, a missed entry can prove just as fatal. Investors who want to live a quieter life should not orientate themselves towards the mainstream, diversify – and stay calm.
From human nature and rapid trends
Human nature is regularly the subject of a wide variety of studies, for example the tendency to parrot, which is referred to as the information cascade: The awareness that our own knowledge cannot be comprehensive prompts us humans to listen to other, supposedly better informed – Ultimately, this is what advertising with prominent faces is based on. If the advertising medium is trustworthy, this promotes the sale of the respective product.
However, what is promised does not always have to prove to be sound, even if a number of consumers have been convinced. In return, it is problematic to stand against the mainstream: If celebrities give their voice to critical opinions, they also get attention, but are quickly sidelined. Against this background it becomes clear that only a few people in public life oppose prevailing opinion at all – even if they actually know better.
Success lies in calm – also when investing
Another success factor for the emergence of new trends is the frequency with which a message is conveyed: Information is considered safe if it is repeated often enough from different sides. Then they are memorized and can be retrieved more quickly – this is how a zeitgeist develops that can reflect regionally different opinions on the same topic.
The drastic corrections made in recent years, for example after the dot-com bubble burst, show that dangerous bubbles can quickly inflate in this way.
Investors should rather stick to the Hungarian financial expert André Kostolany (1906-1999), who figuratively recommended stocking up on high-quality stocks and not touching them for many years. Incidentally, he also foresaw the great upheavals that the New Economy would entail, and warned against any involvement.
Intelligent risk diversification is just as important for the success of an investment as perseverance and patience: setting up your own portfolio broadly and distributing it across different risk classes has proven time and again to be an effective means.