Important money decisions often involve what to avoid. With the start of the new year, how about steering clear of the mania for day trading, meme stocks, cryptocurrencies, and money influencers who dismiss traditional investing advice with the disdainful term HFSP — short for “have fun staying poor.”
HFSP might be the buzzy financial advice; stick to boring and smart instead
Money influencers advise HFSP, or “have fun staying poor,” but going after trendy investments could mean trouble.
By Chris Farrell
January 4, 2025 at 1:00PM
Casino markets are having a moment. The experience with bitcoin, the best-known cryptocurrency, is illustrative. Bitcoin breached a record $107,000 in mid-December, although prices have moderated since.
President-elect Donald Trump is a supporter of crypto, and the industry expects regulators will be friendlier than in the previous administration. Financial institutions have created cryptocurrency exchange traded funds (ETFs) that make it easier to bet on digital assets.
Yet the uncertainties about crypto remain unsettling. Cryptos aren’t efficient as currencies; the record is mixed as an inflation hedge; and they don’t offer owners any “intrinsic value” or cash flow. Cryptos are vehicles for speculation.
Markets are behaving more like a gigantic casino than a capital market allocating money toward its best uses. (That observation has long been true, but the situation is deteriorating.) Clifford Asness, the veteran financier, recently documented in his article “The Less-Efficient Market Hypothesis” how markets over the past 30-plus years “have gotten more disconnected from reality over time.”
After reviewing possible explanations, Asness convincingly lands on the evolution of digital technologies for the rise in market inefficiency. He reasons that much of the shift involves a combination of social media, easily accessible data to everyone, and platforms that have turned trading into a game.
The new year is already full of major uncertainties, such as the scale and scope of tariffs, deportations, and taxes, as well as the wars in Ukraine and the Middle East.
Promoters of meme stocks, gamified trading, cryptocurrencies and other high-risk bets are taking advantage of the uncertainties to peddle quick trading speculations.
Odds are these promoters will coin money peddling their bets. Market history suggests the typical customer won’t.
The HFSP motto is wrong. The typical investor is saving for their retirement years and other long-term goals. Comb through the 401(k) data published by Vanguard and Fidelity and you’ll find a common message.
People who do well over the long haul follow a simple framework. Save regularly to harness the power of compound interest, invest in low-cost well-diversified portfolios; steer clear of market timing, and stay the course.
Call it BDFS: boring, disciplined, frugal and smart.
Chris Farrell is senior economics contributor for “Marketplace” and a commentator for Minnesota Public Radio.
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Chris Farrell
Financial experts have several methods to help clients pay down credit cards and set realistic spending plans for the future.
