Whether it’s your Facebook news feed or conversations in your lunch room, you no doubt have been exposed to the buzz that surrounds the trendiest opportunities and investments out there right now.

Do you ever get that feeling in your stomach when someone explains an investment or “opportunity” to you? I know the feeling of urgency all too well, like if I don’t do something about it today the moment will be lost. The one where you don’t exactly understand what you are signing up for, but if you can figure it out….. man, you’d be set.

diving into investment trends

This feeling has been lovingly named “FOMO”, an acronym for “fear of missing out”. It has only taken me a time or two to realize that this gut feeling is probably going to make me do something I’ll regret if I don’t keep it in check.

I have FOMO all the time, but the situations that stick out clear in my mind are the times when I’ve been on a trip, and the friends I’m with want to go cliff jumping. I’m a pretty adventurous person. I will hike, skydive, and rough it, but cliff jumping into the water freaks me right out. I’ve been there and done that,  and I don’t really like it…

But guess what? When the opportunity arises I’ll usually just do it anyway because I don’t want to miss out on an experience or story with my friends. You know the question your mom would ask…

“if your friends jumped off of a cliff, would you?”

The answer is a resounding yes. I have hurled myself off of jagged rocks and into frigid waters multiple times just because my friends were doing it.

Now that you know this about me, you probably won’t be surprised to hear that I have been caught up in the frenzy over an “opportunity” before. That anxious and urgent feeling has now become a signal that I need to back up the crazy train, do some research, and decide RATIONALLY if this is something I should be getting myself into before blindly jumping off of a financial cliff.

Bitcoin and other cryptocurrencies are leading the most recent frenzy along with the legalization of marijuana as the sideshow. It’s pretty exciting times out there.  These opportunities are attracting the millennial crowd along with an older generation who may feel they are behind in their savings and see this as chance to make up for lost time. Are these the golden tickets we have been waiting for?

I don’t want to be the type of person that blindly writes off things that people are excited about,  so I have a mental checklist based on what I know about wise investing behavior (and myself) to screen whether “opportunities” that come my way are within my boundaries. Maybe it will be of help to you when you’re inevitably faced with these decisions yourself.

Is everyone talking about it?

When something is splashed all over my social media feed and I hear people’s co-workers are encouraging them to buy in, chances are that it’s a full-on frenzy and a risky investment. I’d look at this as a speculative venture versus an investment.

Most likely these people that are promoting this “opportunity” are trying to grow their business and they will benefit from you taking the plunge. They probably wholeheartedly believe that this is going to work out and they are offering something good. If I’m genuinely interested, I do my research, try to learn about it, and make sure any money I put into it I am willing to lose.

Is it a “sure thing”?

If I read or am told a huge return is a “sure thing” that raises a lot of red flags. A basic principle of ventures and investing is that you take a risk for a return. As an investment professional, I am quite certain I would eventually lose my license if I started making guarantees like this.

You can’t make big returns without big risk, and if someone is telling you otherwise they aren’t being honest with you, or they’ve convinced themselves this is a fact. If you are the one convinced it’s a sure thing, are you willing to pay back any friends and family that lose money on this venture?

Can I understand it well enough to explain it?

If I can’t understand it well enough to explain it in a ten-minute conversation, I don’t need that kind of complexity in my life. A good business plan is easy to understand.

Is this trading or investing?

When it comes to cryptocurrencies like bitcoin, there is no business that is backing up their value. The only thing that makes them valuable is demand. This is a commodity. The only way to make money with commodities is to become a trader and make money from buying and selling as the prices rise and fall.

Contrary to popular belief, there are very few people who have done well with trading. This requires you to be watching and researching constantly as well as making perfectly timed decisions.

Is this “The One”?

Are you waiting for me to tell you that every person has only one opportunity come along in their life that can change their life? Sorry, that’s not going to happen (and it’s a subject for an entirely different blog).

What I mean by “the one” is that in cases like the cannabis chaos we are encountering in the stock market today is just people placing their bets on who they believe will be the frontrunner in the industry. None of them are established or making a profit as we wait on legislation.

When the first railroads were being built, there were hundreds of optimistic entrepreneurs that were grasping at the opportunity to build a valuable business in that. How many of these companies stood the test of time in North America? A handful. It would have been nearly impossible at the time to predict that Union Pacific and Canadian National would be “the ones”.

It’s true that there are most definitely companies out there that will profit from legalization but right now it’s a guessing game as to who they are. This concept also applies to the blockchain technology that cryptocurrency is created with. Prices are reflecting overpriced hope and projections at this point.

Still feel like you are missing out?

If you’ve read this, understand the risk, but still can’t help but thinking that you need to be a part of the venture that is staring you in the face, make sure that you have a solid financial plan based on good investments that are sustainable and proven first. Just like cliff jumping, you should never jump unless you know the water is deep enough.

Depending on the stage of life you find yourself, giving it a shot might not be a responsible option. Anything that has a large possible upside will have a downside as well, so you need to be prepared to lose money. If you are coming from a strong financial position, a good rule of thumb is to keep your bets on these ventures to 10% or less of your overall portfolio. Be honest with yourself about where you are at, and what you can afford to lose.

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