You probably don’t want to talk about this right now after having seen your investments squiggle up and down 10% every week, but today I do want to share some thoughts on investing that could help you make the right decisions going forward.

In times like these, when there are big market drops and increased volatility, you may think you need to suddenly change your investment strategy. This started me thinking about the many investment fads that come and go over an investor’s lifetime. And I have seen many of them.

To paraphrase the famous Nobel Laureate, Eugene Fama, who once said something to the effect that, “There’s one significant new idea in finance maybe every 10 or 15 years, but there’s a new marketing idea every week.”

So, a marketing idea as opposed to an investment idea? What do you think he’s saying? I think he’s saying that great investment ideas are normally evolutionary, taking years to perfect and bubble up through the noise. Ideas like value investing, the idea of mutual funds so many years ago, ETFs, quantitative investing, and modern portfolio theory took decades to develop and become part of the mainstream. And even with all those years, professionals still argue about their merits all the time.

Marketing ideas, however, are borne out of the commercial need to drum up new business, and some American companies and many so-called investment advisors slickly specialize in this area.

Is It Time To Change Your Investment Strategy?

Should you be looking to make major changes to your portfolio, make sure you’re sticking to the tried and true and don’t jump into the latest investment fad of the day.

And maybe don’t do anything at all, but if you must, realize that it’s a bit like locking the barn door after the horse is already gone. It would probably have served you better had you done that before the market dropped more than 10% in just a few days. Changing your investment strategy to try to fit an event that’s already occurred doesn’t usually work out well.

The History Of Investment Fads

Let me tell you about the history of various investment fads, so you can easily see how many of them have come and gone. In the 1960s and ‘70s, the great rage of the time was an investment in the “nifty fifty” stocks, a group of large-cap, blue chips, which were often described as “one-decision” stocks because they were viewed as extremely stable, even over long periods of time.

Of course, that stability came at a high cost as most of them sold at sky-high PE ratios resulting in valuations that were far in excess of the true value of the businesses.

Many survive to this day and many do not, but all in all, the returns were less than stellar. And if you missed just a few of the good ones, the returns were a complete disaster.

The late 1990s and early 2000s saw a lot of focus on the “BRIC” markets (Brazil, Russia, India, and China), which did well for a while then lost a good deal of money. There was also the dot-com bubble fad, followed by the bubble burst when many investors threw money at any stock that was even remotely connected to the internet. The idea was kind of right, but the investments were awful. I remember the Biotechnology fad in the ‘80s when the potential of a new world of eradicating disease was the marketing promise of the day. As with all of these, the ideas have merit, but which companies succeed and when is always the great unknown. The 2008 financial crisis spawned plenty of new strategies, such as “Black Swan” strategies. (For those of you who may not know, the coronavirus is not, according to Nassim Taleb, the creator of the term, an example of a Black Swan event, meaning that it was an event that was predicted but could not be timed. A typical Black Swan episode is a totally unforeseen event.

Now today, the current popular investing trends continue to be strat...