Every October we decorate our houses with skeletons, put on elaborate costumes and pretend we enjoy being scared. But investors – the poor, sensation-hungry creatures that we are – don’t need haunted houses. The markets provide their own scares, complete with flickering charts, creepy acronyms and the occasional ghost of past financial decisions.
If you listen carefully, you can hear the whispers: “Buy the dip… diversify later…”
As an avid horror movie lover and a darkly amused observer of investor behavior, I’d like to use the excuse of the Halloween season to draw mildly clever analogies that will guide you through the spooky hallways of modern investing.
The rise of the quirky acronyms
The stock market is many things: a pricing mechanism, a global capital allocator and, occasionally, a stage for truly bizarre theater. It not only delivers returns; it produces stories.
Once upon a time, the power discovered that if you string together a few promising stocks or countries and give them a catchy name, people will believe in them forever.
In the 1960s it was the ‘Nifty Fifty’, a bunch of blue-chip darlings considered so indestructible that you could buy them at any price and reportedly never lose them. In the 2000s, there were the BRICs (Brazil, Russia, India, China), haphazardly packed together for quick consumption, as the world’s next growth engines. More recently, FANG (Facebook, Amazon, Netflix, Google) evolved into FAANG and then into MAG7, because apparently seven is the new four.
Acronyms are comforting. They make investing sound like a club, or at least a game of Scrabble. But they are often more catchy than useful.
Decoding it can feel like playing Sudoku where someone has mixed up a few numbers: you convince yourself that there is a pattern, even if the puzzle no longer makes sense. Investors do the same: hold on to old labels long after they no longer yield.
- Horror movie equivalentnt: The cabin in the woods – you think you know the genre, but it’s really just another extended setup.
The Meme Stock Seance
For a brief caffeinated moment in 2021, the stock market became an elementary school sleepover. Everyone stayed up too late, challenged each other to buy GameStop, and claimed to be able to talk to the ghost of Warren Buffett via Reddit.
Valuations rose from the grave, untouched by fundamentals or basic arithmetic. It was democracy and chaos, with emojis. When it was over, the hangover was brutal. Many have learned this age-old truth about investing: Just because something is trending doesn’t mean it’s immortal.
The fads fade, but strong companies with sustainable profits, bought at a reasonable price, tend to serve much better long-term investors.
- Horror film equivalent: The scream series – self-aware, overhyped and ultimately a cautionary tale about confusing irony with safety.
The fog of American overconcentration
We all know the classic horror trope where the house that looks completely normal is actually on cursed ground. I’m not saying this is the US stock market…but let’s dig deeper.
We know we need to diversify, but it can still be hard to resist the warm glow of American exceptionalism. The S&P 500 has become the financial equivalent of a pumpkin spice latte: comforting, all over the place, but not nearly diversified enough (all I’m saying is don’t sleep on the brown sugar oat milk latte).
Consider this:
Meanwhile, the rest of the world’s markets languish in the basement, covered in cobwebs, muttering, “Do you remember us?” But over-concentration is a silent form of horror. It doesn’t jump out and scream; it just slowly takes over the plot until there’s no place left to hide.
If you want to dive deeper into this eerie reality, check out Purpose Associate Portfolio Manager Brett Gustafson’s recent article The comfort trap.
- Horror movie equivalent: Go away – you think you’re in a safe, inconspicuous area until you realize you should have left 20 minutes ago.
How to keep the monsters at bay
If you’re retired or on the move, your goals are probably simple: protect your capital, generate a steady income, and sleep at night.
But real nightmare food can disguise itself. What can a wise investor do?
- Don’t chase ghosts. If an investment has a catchy name, it has already been discovered. Ask what lies under the white sheet.
- Revisit the cast of characters in your portfolio. If US stocks have quietly taken over, consider adding some global exposure to balance the plot.
- Consult with your advisor before taking action. Especially when you find yourself thinking, “Everyone is doing it.” That’s usually when the lights start flickering.
While the pumpkins glow and the markets tremble, remember: the scariest thing about investing isn’t the volatility. You forget that markets, like haunted houses, are designed to freak you out.
Stay calm. Stay diversified. And if you hear whispers in the dark, it’s probably just the ghost of your GameStop investment.
Happy Halloween. 🎃
PS: You didn’t ask, but my all-time favorite horror movie and creepy recommendation is the 2014 horror/comedy Homebound. Check it out.
Vanessa
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