Editor's note: Investors are piling into one sector right now... But following the crowd isn't the best strategy for success. In this piece – adapted from the June 14 issue of Retirement Trader – our colleague Dr. David "Doc" Eifrig explains why investors should avoid this popular investment right now... and how to find better places to put your money.
Throughout my professional life, I've questioned everything...
Anytime I would hear, "That's just the way things are," I wanted to cringe, and steam would come out of my ears.
This mindset is part of what drove me first out of Wall Street and then out of medicine.
Even during board and manager meetings I've attended over the past several years, I never just accept the status quo. I question everything and look for a better way.
Some call me a pain in their rear end for my persistency. But it's in my nature to be a contrarian. And this has served me well.
You don't find much success in life by just doing what everyone else is doing.
Period.
But especially in the markets, I've long been an advocate for going against the herd...
Several months ago in my Retirement Trader newsletter, I bashed the most popular investment in the world... Nvidia (NVDA).
I found it outrageous that Nvidia was worth nearly twice as much as the S&P 500 Index's energy sector. The future is bright for Nvidia, no doubt. But given its valuation and the bloated sentiment around the company, I don't see things ending well for late investors hoping to make a quick fortune.
The stock is priced to perfection. Any slipup with its hypergrowth story – even a minor one – could send the stock barreling down in an instant.
Now, you might say I botched my previous call with Nvidia. If you'd bought shares on the day of my previous rant about the stock being overpriced, you'd be up big.
So sure, if you get lucky with the timing – including when you sell, not just when you buy – you might do OK...
But I know markets. I've seen growth stories like Nvidia before where everyone and their grandmother was clamoring to buy the stock... They don't end well.
Technology stocks in general are tough for me to get behind because of their valuations and the hype around them.
The chart below tracks investment dollars flowing in and out of specific sectors over the past year. As you can see, investors are piling into the tech space. That's because many of these companies are using the latest buzzword: AI...
Could you join in and add fuel to the fire? Well, a strategy like that can work in the short term. You can make a quick profit if your timing is right. But as soon as volatility hits, many of these new "investors" will abandon ship. And that can lead to disastrous losses.
As a contrarian, I look for extremes.
I see an extreme with Nvidia... what's known as "irrational exuberance." And I want nothing to do with it.
On the other end of the spectrum, I look at the chart above and get excited. Other sectors besides tech are seeing massive outflows right now. Investors are paying no attention to them.
That's where I want to put my money.
When there's real underlying value and a path forward to high growth... while folks aren't paying attention... that's a fantastic combination.
Make sure you're taking advantage of it today.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: Doc foresees soaring prices and market volatility down the road... And he wants to show as many folks as possible how to generate steady income in a lower-risk way. That's why he's stepping forward to help you take control of your retirement. This simple strategy doesn't involve holding volatile stocks... or even dividend-paying blue chips. But it has a 95% win rate that spans more than 14 years... Click here to learn more.
Further Reading
"To make a killing in the oil and gas industry today, you need to understand its cycles," Whitney Tilson writes. Folks might think demand is what makes oil prices rise. But another factor is what really drives prices upward – and it's setting up a boom in oil and gas... Read more here.
"Everything people thought they knew about Big Tech stocks, the jobs market, and the overall economy has been upended since the first half of this year," Doc writes. In times of turmoil, you want to get back to the basics of investing. And three fundamental principles can help protect your wealth, even in uncertainty... Learn more here.