Almost 2 years ago in our March 2021 newsletter, we discussed the fear of missing out when investing. This was a time when cryptocurrency and MEME stocks were all the rage and made the idea of investing seem like an easy way to get rich.
Did they get rich?
For most individual investors, it did not work out.
It almost seemed like cryptocurrency was going mainstream. It started with Super Bowl ads almost a year ago now. Bitcoin and other cryptocurrencies were supposed to act as a buffer to the increasing inflation and interest rates we started to see. It just didn’t happen.
Besides the price declines in Bitcoin (off 50% from March 1, 2021, and off 65% from its November 2021 all-time high), failures of cryptocurrencies Luna and Terra, the insolvency of trading platform Voyager, the collapse of crypto hedge fund Three Arrows Capital, and the bankruptcies of lenders BlockFi and Celsius, they all pale in comparison to the collapse of FTX. Once valued at over $32 billion, FTX became worthless in a matter of just 10 days in November 2022.
The same is true for the darling MEME stocks of the internet chat rooms in 2021, GameStop (GME) and AMC Entertainment (AMC) being the best known. GME is off over 73% of the high set in January 2021 and over 24% from when we wrote about it in our March 2021 newsletter. And AMC is off over 90% from the high in June 2021 and about 40% from March 2021.
The chart below shows how the S&P 500 has compared to GME, AMC, and Bitcoin since March 2021. This chart illustrates two very interesting points. First, even after a bear market in 2022, the S&P 500 has had a positive return over the past 23 months. Second, when we look at the price fluctuations over this period, or the volatility, GME and AMC are much more volatile in their pricing than even Bitcoin.
There have been many new investments and investment strategies that garner everyone’s attention and are portrayed as the next big thing, but the reality is few have withstood the test of time.
It may not be flashy or a get rich quick solution, but a diversified portfolio of stocks and bonds over time has shown the ability to create lifelong wealth, especially when part of a valid financial plan.
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”. –Benjamin Graham, Economist and Investor
Gregory, Gabriella, Brian, Samer, and Chris
Prato Capital Management Where Integrity Meets Discipline
