The 1980s and 1990s were primed for collecting items in the hopes of hitting it big. I can remember getting my hands on a “Garbage Pail Kid” worth hundreds of dollars and feeling that euphoria that I’d just made my fortune. Sadly, a year later, it was only worth the paper it was printed on.
Plenty of adults, now in their 30s and 40s, still have boxes full of baseball cards, mini helmets, beanie babies and precious moments figurines. It was going to be their ticket someday, their rainy day fund. This was serious business. Beanie babies were more than just toys. In the eyes and hearts of collectors, Beanie Babies were their kids’ college funds. And they were willing to stampede into a store to get them when the opportunity struck. Grown men were literally fighting each other for them!
Check out this ABC News article about a family that sank $100k into Beanie Babies. Let me ask you something, how much would you pay for one today? There are a small handful that can still command a high price but the rest are worth zilch, nada, the big goose egg. You’re lucky to get a quarter for one at a garage sale because nobody wants your stinky old stuffed animal.
In hindsight, it seems pretty silly, right? But from 1993-1999, they were incredibly popular. And then one day, they just weren’t. In 1999, the maker of Beanie Babies, Ty, announced the retirement of several Beanie Babies (a marketing tactic to boost the popularity and value of the brand) and no one rushed to the store to trample small children and knock over old ladies.
Just as quickly as it started, it was over. Crashed and burned. And that is the hallmark of a fad, trend or craze. It’s characterized by a sharp rise in popularity, usually despite no real community need, followed by a sudden death.
The kicker? If that same family had invested $100,000 in the NASDAQ Index in 1993 and never added another dime to it, it would have yielded over $1.15 million by now.
My friends, when it comes to investing, fads are not your friends. If you’re looking at investing in a product that everyone just has to have right now, ask yourself a few questions: how fast did it rise in popularity, and why does everyone have to have it? Does it fill a deep need within the market, or is there a hint of mob mentality in the air? Does the product itself provide an actual value that matches its perceived value or does the value really rest on the faith and somewhat irrational desire of the investors?
A recent fad is Bitcoin. Bitcoin was worth over $19k at its peak in 2017. Today’s value is under $8k. Riding the Bitcoin wave is a wild rollercoaster ride of ups and downs. For most people who live paycheck to paycheck, those lows can be devastating to their financial health. The lure of getting rich quickly is a game that can quickly end in bankruptcy and devastation to your career and finance core.
If you truly think it’s going to be the next big thing, or get a lot of enjoyment from something, you can always dip your toe in, but be wary of betting the farm. It’s just straight gambling, which can easily develop into a crippling disease.
We all know the saying when it comes to get rich quick schemes, “If it’s too good to be true, it probably is.” Keep your eye on the long-term prize and you won’t have to worry about crashing fads.
This week’s tip
Take a look at all of the ways you invest your money - in your home, 401k, the stock market, your business, collector’s items etc. Make sure that how you invest is balanced enough to ensure your financial health before taking big risks.
Here’s a helpful guide to some common questions you may have about the fundamentals of investing and planning for retirement: https://money.cnn.com/retirement/guide/investing_basics.moneymag/index.htm?iid=EL