Some investments have an almost irrational hold on people. Especially those that promise to deliver great riches.
Dreams of avarice
Bitcoin is definitely one of them. Its crazy price growth has sucked in the get-rich-quick crowd, but at today’s price of nearly $12,000 you are taking an unwarranted risk buying it. Royston Wild would buy this stock instead.
Buy-to-let was another crowdpleaser, delivering 20 years of capital growth and income until it succumbed to the Treasury’s tax attack. Rupert Hargreaves reckons the FTSE 250 should easily beat it now.
Others swear by gold, which has a 4,000-year history as a store of value. But since it doesn’t pay income, you are reliant on price growth to make money, and that can be highly volatile.
All three may have a place in a diversified investment portfolio, but the bulk of your money should still go into stocks and shares.
There have been times when investors have lost their heads over stock markets as well. I remember the bull market runs of the 1980s and 1990s, culminating in the pre-Millennium technology boom and subsequent bust in 2000. There was plenty of euphoria then.
There isn’t much today, which is odd, as the S&P 500, Dow and Nasdaq have just hit all-time highs after the longest bull run in US history. Investors remain sceptical, because they know this has been built on loose monetary policy and the underlying economy is decidedly shaky.
Doomsayers have been warning of a crash for years but it hasn’t happened, or rather, central bankers won’t let it happen. The Fed is looking to cut rates again, almost certainly this month and possibly by 0.5%, which should keep the bulls running for a little longer.
Where will the stock market go for the rest of the year?