Do you remember the late 1990s? It wasn’t only a time of flannel shirts and jeans. It wasn’t just Beanie Babies, “Friends,” and Leonardo DiCaprio. It was also a time for incredible leaps in technology—the birth of the so-called “Dot-Com Era.” This got investors excited—maybe a little too excited.

As a financial advisor, I’ve seen plenty of trends come and go. In recent years, cryptocurrency and NFTs have dominated headlines and conversations. The validity of these “investments” has recently been called into question (with the failure of FTX, several NFT collections collapsing, and Coinbase getting sued by the SEC), but many people are still investing.

And even if NFTs and crypto fail spectacularly, there will always be another investment trend. It seems we just can’t help ourselves. The allure of taking a gamble to “get rich quick” is apparently baked into our DNA. Instead of jumping on the next hype, it’s a good idea to take a step back and examine some of the lessons we’ve already learned. An excellent example of investment-hype-gone-wrong is the Dot-Com Era.

The Rise and Fall of the Dot-Com Bubble

In the late ‘90s, investors were pouring money into all types of companies that were even remotely associated with the internet. It didn’t matter if the business was profitable or not. It didn’t matter if they had a solid business plan. As long as they had “.com” beside their name, it seemed like they were destined for success.

This haphazard investing was always doomed to fail. When the Dot-Com “bubble” burst between 2001 and 2002, the market plummeted. Between 1995 and 2000, the Nasdaq Composite index had risen rapidly and bullishly, but most of its gains were erased between March, 2000 and October, 2002. Countless companies went bankrupt, and trillions of dollars were lost.

The Danger of Hasty Investment Decisions

The Dot-Com Era is a cautionary tale about the danger of hasty investment decisions. It’s easy to get caught up in the hype. It’s easy to think “this time is different.” But as the saying goes, history repeats itself.

Chasing trends is rarely profitable. Yes, a few lucky individuals will be able to time the market perfectly to take advantage of a trend, but they are, by far, the exception to the rule.

It’s crucial to remember that investment is a marathon, not a sprint. Slow and steady wins the race. Instead of chasing after the latest fad, I recommend working with a financial advisor to invest in solid, well-researched companies that have a proven track record of success. And always diversify your portfolio, so you’re spreading your risk across many different areas.

Becoming a Steady, Long-Term Investor

To become a long-term investor with a steady, stable plan, it’s essential to refrain from jumping into a hot trend just because everyone else is doing it. Take time to do your research. Look for companies with solid business models and sustainable growth. Consult your financial advisor.

Beyond these basic principles, I recommend a “set it and forget it” approach. It’s better for most people to only marginally pay attention to their investments. If you obsess about the stock market’s daily ups and downs, you will inevitably become nervous, stressed, and tempted to stray from your plan.

I’ve written several blog posts about long-term investing and planning that may be worth re-reading to refresh your memory on the concepts:

None of these principles are earth-shattering, but they ARE proven and practical.

Next time you’re tempted to chase a trend, such as NFTs or cryptocurrency, I recommend taking a step back and considering past lessons. We can learn from investing mishaps, such as the rapid rise and fall of many Dot-Com Era businesses. Instead of making hasty, hype-based decisions, take a long-term, steady approach. Your future self will thank you.

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