2020 has been tough on everyone but there are some, firmly ensconced in their mansions brooding, not about the corona virus, but regretting having missed out on Tesla’s electrifying ascent this year. Since its 2010 IPO, the stock has turned in, a not so modest, return of 12,500%, with a guy at the helm who smoked weed at a TV interview and blasted the naysayers with language that our ex-President would envy. But, much like Trump, Tesla’s CEO – Mr. Musk has developed a cult following that has made him one of the wealthiest people on Earth.

Investors who missed out on Tesla are now in a crazy hunt to catch the next IPO. And hence, we have Snowflake, Palantir, Doordash and Airbnb among others driven to astronomical heights with no respect to valuation or fundamentals. The same investors may not realize that Tesla is not even close to being the best performing stock. That honor goes to Xpel that is up 170,000% since its IPO. And on a more sobering note, there is a plethora of companies who have lost 99% of their value since their IPO and a lot more than have gone to zero.

Yet, the fear of missing out prompts investors to blindly throw money at the next hot IPO.

Future Wealth’s View

In a year when leading a life without contracting the virus and getting a steady paycheck would be considered a salubrious lifestyle, greed creeps in and distorts the dynamic. Markets, despite being in complete dissonance from economics on the ground in terms of unemployment, accelerating deaths and infections, have held steady and produced outstanding returns to investors, all things considered.

But, investors are being sucked into the prospect of outrageous returns. The problem with becoming a part of a herd looking for the next Tesla is that the effort very quickly becomes devoid of common sense. We would urge the intelligent investor to be content with a diversified portfolio aimed at providing solid long term returns rather than becoming envious of those chasing bigger gains. We would, however, recommend remaining friends with those who are throwing their money at the next big IPO. You might get to fly with them in their charter jet on their next vacation if they strike it rich, but with little risk of losing your own retirement funds. If they lose their money, you won’t hear from them anyways. It’s a Win-Win.