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4 investment trends in the spotlight: Do they really deserve the attention?

Some call them hot, others call them not. Here are the facts about a few buzzy investment trends.

Read, 4 minutes

There’s a lot of chatter online about investing these days, and you’ve probably heard about “meme stocks” or other types of speculative investments. But how much do you really know about them? Though it can be tempting to jump on the bandwagon, it’s important to do your own research before making any investment decisions, verify the trustworthiness of online information sources and understand the risks involved. Some types of short-term investments, for example, could lead to substantial financial losses.

Here are four emerging investment trends—and what to consider beyond the buzz.

Meme stocks

What are they?

Meme stocks are stocks whose prices can skyrocket after going viral online. The price increases are fueled by individuals who may be drawn by nostalgia, a funny backstory, or a desire to ding big investors who are betting the stock price will fall (commonly referred to as “shorting the stock”). Investment “tips” for meme stocks proliferate in social media feeds and message boards.



Speculative currencies

What are they?

Speculative currencies generally refer to a type of digital money or asset, often available in the form of coins or tokens. Many types of digital money can also be bought and sold as speculative investments through an online exchange or platform. Similarly, unique pieces of digital assets, such as artwork or sports cards, can be traded through a virtual marketplace.



Day trading

What is it?

Day trading refers to a rapid buying and selling of stocks and other financial products. Day traders may buy or sell shares within hours or minutes, seeking to capitalize on short-term changes in price. Some day traders may borrow money to fund their trading.



SPACs

What is it?

A special purpose acquisition company, or SPAC, is an entity that raises money by selling shares to the public and uses the money raised to acquire a private company. Upon acquisition, the private company is typically converted into a publicly traded one through an initial public offering (IPO).



Playing the long game: an investing approach that's timeless

Although some of these financial fads may get plenty of attention, it’s also important to focus on investing a regular amount consistently over time, rather than trying to predict when the market will move up or down. If you’re convinced something is a sound investment, consider letting time—and your money—work for you by creating a long-term strategy that reflects your goals, time horizon and risk tolerance. If you try to time the market, you could miss out on stock price recovery, dividends, share buybacks and interest payments. By building a balanced portfolio with a mix of assets—stocks, bonds, cash or other investments—you may be better positioned for success in the long run.



The best days make a difference

Missing the 10 strongest days of the S&P 500 Index in any
decade could have a dramatic effect on cumulative returns.

Close text version

Growth of $10,000

$41,100 Total period of investing, 9.88% annualized return

$18,829 Miss the best 10 days, 4.31% annualized return

$11,400 Miss the best 20 days, 0.88% annualized return

$7,526 Miss the best 30 days, -1.88% annualized return

Source: Standard & Poor’s 500® Index, 12/31/20. Average annual returns are based on the S&P 500 Index from 12/31/04-12/31/20. Large-capitalization stock performance is measured by the S&P 500 Index, an unmanaged index considered to be representative of the U.S. stock market. Prices of common stocks will fluctuate with market conditions and may involve loss of principal when sold. Results assume reinvestment of all distributions, including dividends, earnings, and expenses, and are not indicative of any past or future returns of any investment. It is not possible to invest directly into an index. This is a hypothetical example. Past performance is no guarantee of future results.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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