Viewpoint: Avoiding Investment Fads
By Ralph Goldsticker, CFA | June 2021

Every few years, investment banks and asset managers “discover” a new way to improve clients’ investment results. Sometimes it’s a new idea, and sometimes it’s an old idea that’s been polished, repackaged, and pitched as new. While it’s impossible to predict with certainty whether these new ideas will work, historical examples demonstrate that investors need to look below the surface, and carefully examine the basis for the new idea’s promised performance. 

We believe investors should focus on fundamental economic relationships. Too often these new investment ideas are promoted using assumptions that are specious and unlikely to hold. This Viewpoint will review several historical investment fads and illustrate how deeper analysis could have avoided or mitigated the attendant losses.

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