It’s easy to get sucked into the hype around many headline-making investments, be it meme stocks, crypto or something else. But “the key is making sure the portfolio is built to support real financial goals first, rather than headlines,” says Christopher L. Stroup, certified financial planner and founder and president at Silicon Beach Financial. “For most investors, discipline and structure still matter more than momentum.”
In other words, you need a solid financial plan — if you want help creating one, you can find a financial adviser at NAPFA, CFP Board or by using this free tool that matches you to fiduciary advisers from our ad partner SmartAsset. And once you have that plan, you may still want to be wary of certain investments.
Here are the investments and investment advice that six CFPs and other industry experts told us you may want to be wary of:
Meme stocks and other hype investments — Ryan Haiss, CFP at Flynn Zito Capital Management
“I’m skeptical of investing trends that blow up on social media like meme stocks, ‘hot’ themes, or whatever everyone says is the can’t-miss trade right now. It can feel exciting, but it often pushes newer investors to buy after prices have already run up, and then panic-sell when the hype fades.
A better approach is to build a simple, diversified long-term portfolio first. If you want to take a swing on something trendy, keep it small and intentional. Think of it more as ‘fun money’ than a core holding. That keeps one idea from derailing your bigger goals.”
Using a strategic allocation portfolio, like 60/40 — Roland Chow, financial planner and portfolio manager at Optura Advisors
“A popular investing trend is to use a strategic allocation portfolio like 60/40 (or 70/30, etc.) where the 60% is allocated to equity positions and 40% is allocated to bonds or using target date funds. Both types of investing use a popular method of a ‘balanced’ portfolio, where the theory is that bonds stabilize a portfolio and helps to reduce volatility and drawdown in the event of a market crash. I’m skeptical of this for several reasons. Bonds and interest rates move in 20 to 40 year cycles. For the last 40 years, bonds have been a safe haven during tumultuous times in the market because interest rates have been steadily decreasing since 1981.
However, that completely changed in 2022 when interest rates jumped to levels not seen in several decades. One can simply look at target date funds that were supposed to be ‘de-risked’ into bonds in their target year like in 2020 for the VTWNX (Vanguard Target Retirement 2020 Fund) for example. It experienced a gut-wrenching drop in 2020 during Covid (in the year of derisking) and then another gut-wrenching drop in 2022 (after when it was supposed to be completely de-risked) and it really has not recovered since. Aside from that primary issue with these types of investments, they will likely not be able to perform better than the market index in the long term because the bonds will drag down performance.”
Complex ETFs — William E. Koehler, CFA and president at Midwest Advisors
“We are skeptical of the burgeoning trend where investors are being shown even more esoteric offerings in the leveraged, inverse and single stock ETF universe. We have yet to see a situation where a well-designed, thoughtfully allocated portfolio with a long-term investment horizon would require the inclusion of such a vehicle.”
Crypto investing — Philip Gallant, managing partner at The Optimus Group, LLC
“Without a doubt, the investment trend I am most skeptical of is crypto investing. Crypto is too often confused as investing when in reality, like gold and other precious metals, it is speculating rather than investing. To include crypto as a major part of a retirement plan is very dangerous in my opinion, because it is impossible to do any kind of research to validate a crypto recommendation, and that’s why I don’t do it. Traditional investing allows an investor to research companies, management, P/E ratios, standard deviation over time, alpha and so much more.”
AI trading platforms — Brad Clark, investment adviser representative and founder of Solomon Financial
“The investment trend I see online that I believe will cause more problems than it solves is the use of AI trading platforms. They suggest that the AI software has some ability to evaluate market movements that will allow it to trade on your behalf and outperform the market.
This basic idea has been tried for years with various money managers, software and other strategies. It rarely sees success and more often tends to produce results that are worse than the market. If by some chance AI could outperform consistently, then everyone would switch to it and once that occurs the system would no longer work.”
Narrative-driven investing as a main strategy — Christopher L. Stroup, CFP and founder and president at Silicon Beach Financial
“One popular investing trend I’m skeptical of is treating thematic or ‘story-driven’ investing as a core portfolio strategy. Whether it’s AI, clean energy or the latest innovation ETF, the narrative is often compelling, but the pricing already reflects that excitement by the time most investors get involved.
For our clients that tend to be entrepreneurs or professionals in tech, this can be especially risky. Many already have concentrated exposure to similar themes through their careers, equity compensation, or businesses. Layering additional bets on the same trends can quietly increase risk rather than diversify it. That doesn’t mean trends have no place. They can make sense as a small, intentional allocation with clear expectations around volatility, taxes and exit strategy.”