Since the end of January, #YOLO has been a rallying cry on internet message boards where amateur investors have driven up stock prices for video game retailer GameStop and movie theatre chain AMC. While everyone does have opportunities to build wealth via the markets, this particular group of fresh investors are only half-right about their investment strategy.
It is true that “you only live once,” and you need to make the most of the financial opportunities available to you. But when it comes to your investments, we advise measured, long-term financial planning to short-term speculation.
How much can you earn? How much could you lose?
Setting aside the larger implications of #YOLO for our financial system, let’s focus on the individual.
Yes, some GameStop and AMC investors are cashing out large multiples of their initial investments. But others are letting their investments ride, hoping for even greater returns. If enough current holders decide to cash out quickly, the price of these stocks will fall dramatically. The losses for some investors could be catastrophic, especially young people who are in the beginning stages of their wealth journey.
While we support folks getting more interested in investing, we recommend starting your process by meeting with a trusted financial professional.
Short-term gains or long-term prosperity?
While making a couple thousand dollars overnight sounds exciting, that ROI is no match for the wealth-building power of a balanced, diversified financial plan.
The small investments that some of the #YOLO crowd are cashing out today could have earned upwards of 10% annually had they been invested over the last year in an S&P 500 mutual fund rather than the hot stock of the moment. Hopefully, some #YOLO investors will reinvest their earnings in low-cost, globally diversified portfolios that will help them create a more secure financial future.
What’s your plan?
Rather than debate the merits of those motivations, let’s think about all the goals that require long term investment strategies:
- Buying a new house.
- Sending your kids to college.
- Paying down debt.
- Topping off your IRA or 401(k).
- Starting your own small business.
- Supporting an infirmed parent.
- Saving for a dream family vacation.
- Moving to your ideal retirement destination.
It is important to remember that our big-picture strategy is much bigger than any one stock or any one market fluctuation. Instead, we structure your Strategic Life Plan to meet the goals, challenges, and transitions that you and your family will face throughout every stage of your lives.
We would love to help your family’s next generation get a head start on their planning as well. If your children or grandchildren are asking about #YOLO or have a new interest in finance, let’s schedule a group meeting or video call to begin their education, and keep their allowance money pointed in the right direction.
The information in this article should not be considered investment advice to you, nor an offer to buy or sell any securities or financial instruments. The services, or investment strategies mentioned above may not be available to, or suitable, for you. Consult a financial advisor or tax professional before implementing any investment, tax or other strategy mentioned herein. The information herein is believed accurate as of the time it is presented, and it may become inaccurate or outdated with the passage of time. Past performance does not guarantee future performance. All investments may lose money.