For somebody who mostly invests in FTSE 100 stocks, the frenzy surrounding GameStop, AMC and silver has been a fascinating experience. Private investors have pooled their power to do something remarkable, and take on the giant Wall Street hedge funds. Melvin Capital is said to have lost £7bn in the ‘short squeeze’.
While some traders are looking to make quick money, others are not. There are plenty of idealists on the Reddit WallStreetBets message boards, looking to strike a blow for the little guy against big money. Judging by their comments, many are willing to sacrifice their own cash along the way.
I’ll admit I don’t get that kind of buzz from building a balanced portfolio of FTSE 100 stocks, which is my jump-off point when investing. I’m not part of anybody’s crusade, I’m just hoping to build enough money to retire one day.
I prefer to invest without emotion
The thing is, I don’t want to get a buzz from investing. The only emotion I want is quiet satisfaction. It’s a different matter on the Reddit boards, which are fizzing with every imaginable emotion. Fear, greed, anger, frustration, hope, euphoria and despair figure highly. Everything from FOMO (fear of missing out) to FOBI (fear of being invested). My concern is that this is distorting decision-making. The risk is it will hand victory to the cold-hearted hedgies on a plate.
Investing in FTSE 100 stocks is not totally devoid of emotion. There was plenty of fear and greed on display when the index crashed by a third to just below 5,000 last March.
I kept calm by remembering that I was investing for periods measured in decades, and history shows markets always recover from a correction, if I give them time. Then I made myself feel even better by picking up some bargain shares and funds at a discount.
I’m buying FTSE 100 stocks for income and growth
I can’t imagine what’s going through the heads of investors who threw their last cent into GameStop when it shot past $400, having read posts claiming it would rocket to $5,000 or $10,000. As I write this, it has fallen back to $90. AMC Entertainment is also falling. The silver rally quickly foundered (and most Reddit posters disowned it anyway).
I was briefly tempted to chuck money into GameStop at $250, and then I calmed down and went back to reading up on FTSE 100 stocks. I’m glad I did. As its subsequent slippage has reminded me, nobody can accurately second-guess share price movements. My limited experience of spread betting and crypto trading suggests that assets move exactly the way you do not want them to move. So if you buy they could fall, if you sell they could rise. It’s investment sod’s law.
So I’m back to buying mostly British blue-chips, balanced with some overseas equity exposure. I plan to hold my purchases for the long term, while investing all the dividends for growth. In the longer run, I believe that big boring FTSE 100 stocks give me a better chance of getting rich (even with their risks) than manic movers like GameStop.