The investment trend is not your friend

By ROBIN POWELL

Most of us have been tempted by the latest investment fad, and many of us have succumbed. I certainly have. Before discovering evidence-based investing, I often read the money sections of Sunday newspapers in search of new ideas, and on the occasions I was persuaded to invest it rarely turned out well.

Perhaps my biggest investment regret was buying a technology fund in the late 1990s. It seemed a logical thing to do at the time. After all, the internet was starting to change our lives dramatically. Yet I, along with many other investors, lost money in the dotcom crash.

There are plenty of similar ideas around today — artificial intelligence, plant-based meat alternatives and driverless cars, for example. You could make a strong case for investing in any of those things. Other investment ideas are billed as diversifiers, with risks that aren’t correlated with those of equities, but which offer the potential for higher returns than cash or bonds.

However, it’s vitally important, when you read about new investment “opportunities”, to slow down and look at the bigger picture before investing your hard-earned money.

We’re naturally drawn to investment trends

The attraction of the latest investment trends and themes is deeply ingrained in us. It’s largely down to how the human brain has evolved over hundreds of thousands of years.

We tend to look for patterns, for example, even where none exists. We’re also highly influenced by what those around us are doing; for instance, if someone you know has made a small killing on a particular investment, we’re far more likely to invest ourselves.

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WANT TO LEARN MORE ABOUT EVIDENCE-BASED INVESTING?

When it comes to planning your financial future, you need a strategy that’s based on solid foundations.

In their award-winning book, How to Fund the Life You Want, Robin Powell and Jonathan Hollow explain how evidence-based investing works, and the practical steps you need to take to implement an evidence-based investment strategy.

It’s published by Bloomsbury and is primarily intended for a UK audience.

You can buy the book on Amazon, on Bookshop.org, and in all good bookshops. There are eBook and audio book versions as well.