How do you invest wisely in trends—without becoming a trend-hopping investor?
“It’s tricky,” says LouAnn Lofton, Motley Fool contributor and author of “Warren Buffett Invests Like a Girl.” “You can’t get caught up in the hype.”
Last year people were talking up social media companies, she notes. “But Groupon is down 78% since their IPO last November, and Facebook is down 45% since May.”
That’s not to say you can’t spot a promising trend (say, the many services aimed at the aging Boomer market).
“But you still have to do your due diligence,” Lofton says, if you want to invest in companies or mutual funds in those markets.
Pick a trend with legs. You probably have an eye for companies or products with potential. Cloud computing, for example, has a buzz about it. Is it a fad? Maybe not. Forester research recently estimated that this market could grow from $41 billion today to $241 billion by 2020, Lofton says.
Go with what you know. If cloud computing (or aging Boomers) aren’t your speed, that’s fine. Make sure you understand how a company operates, or why a certain market is thriving.
“Women in particular need to trust that they can make good investing decisions based on what they know, and where they spend money every day.”