Investing in the latest health and wellness trends can be a financial fallacy because of several reasons. One is that trends by definition are short-lived. They come and go, and so do the companies that are built solely around them. When you invest in these companies, you stand to lose your money when that trend fades. Furthermore, not every trend becomes profitable. It takes time and careful planning to actually monetize a trend, and many businesses fail in this respect. Lastly, trends are notoriously unpredictable. What’s trending today may not be trending tomorrow, making this a high-risk investment strategy.
It’s understandable why some people fall for this type of fallacy. For one, these health and wellness trends are compelling and attractively packaged. They often promise quick and significant benefits to personal health or well-being, which appeals to our innate desire for immediate gratification. Also, marketing campaigns for these trends are usually quite persuasive and widely dispersed across different media platforms, easily captivating wide audiences.
An appropriate financial practice would be to conduct extensive research before making any investment. Rather than following trends, investments should be based on the company’s fundamentals, such as its balance sheet, the competency of its management, and its market performance. A diverse investment portfolio that balances risk is also a sound strategy. It is also wise to view investing as a long-term endeavour rather than a get-rich-quick scheme.
Further readings specific to this fallacy:
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“A Random Walk Down Wall Street” by Burton Malkiel. Book Link. This book discusses various common fallacies in investing, including trend chasing.
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“The Little Book of Common Sense Investing” by John C. Bogle. Book Link. Another valuable resource that emphasizes on long-term, low-cost investment strategies rather than running after trends.
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“Stock Market 101: From Bull and Bear Markets to Dividends, Shares, and Margins―Your Essential Guide to the Stock Market” by Michele Cagan. Book Link. This book provides a clear understanding about stock market and its functioning rather than running after latest trends.
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“Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets” by Nassim Nicholas Taleb. Book Link. This book emphasizes on unpredictability of markets and investment trends.
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“Common Sense on Mutual Funds” by John C. Bogle. Book Link. Another great book which discusses the importance of understanding the fundamentals of a company before making investment decisions.