TORONTO — After shares of BlackBerry and GameStop surged this week amid hype on social media, investors may be tempted to get in on the action, even if there is no company news driving the stocks higher.
But experts say investors should not get swept up by investment trends because of a fear of missing out on the next hot stock.
Dave Hardisty, the chair of marketing and behavioural science at The University of British Columbia Sauder School of Business, says that it’s human nature to pay disproportionately more attention to those who are doing better than you — especially if they look like they’re making more money on social media.
Hardisty says that in reality, even professional investors can struggle to pick individual stocks — a theory Warren Buffett famously tested when his chosen index fund won a bet against a hedge fund manager.
Hardisty suggests people put a date on their calendar every few months to check on their investments, rather than watch the stock market every day, to keep themselves from getting caught up in daily ups and downs.
University of Toronto finance professor Lisa Kramer says that while sticking to a sensible investing plan can seem boring, checking stocks daily can become highly addictive. Investors might consider instead setting aside a small, fixed portion of their overall portfolio for “fun” or more speculative investments.
“If they really can’t resist that impulse to jump in and hold some of those stocks that they’re hearing about in the online forums, then at least contain the exposure,” Kramer says. “Set aside a fraction of the total portfolio that you treat as entertainment — and that you can afford to lose.”
This report by The Canadian Press was first published Jan. 26, 2021.
