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Fads and One Hit Wonders – Make for Poor Investments

“People can and always will make good money off these types of stocks but they will never make good income from them”

Don't buy Fad Stocks Don't buy Fad Stocks

Fads and One Hit Wonders.

Not a viable place to Invest, at least for the long term investor.

Some stocks that come to mind currently are :

Gymboree – Gamestop- Fitbit – Go Pro – Groupon – Soda Stream- Telsa?-  Just to name a few. Of course I have to admit – I have been wrong in the past – I thought for sure Facebook would be another MySpace by now.  And it is entirely possible that some of these companies may expand into other businesses or product lines to sustain themselves but most will die and become nothing more than distant memories.

Whatever your point of view with these companies the point is that they have no place in the Portfolio of a Dividend Income Investor. These type of stocks are best left to traders and speculators. No matter how great a product is unless it is something consumers need or require on a regular basis it will eventually go into a steep decline. Let’s consider Go-Pro. There’s no doubt that Go-Pro makes some great camera’s but the truth is their market is saturated. Only certain people need or desire these cameras and the vast majority of us will never own one because we really do not have use for them. Out of those that do own one many of them have received them as gifts ( usually a one time thing) and many others will only buy the product once or at most every few years. Now certainly Go-Pro can survive with this model but in all probability unless they can come with more everyday products they will not thrive enough for investors and certainly not for Dividend Income Investors.

When considering stocks to add into your Dividend Income Portfolio you you consider:

  • does it pay a dividend( As a Dividend Income Investor it has to pay a higher yield ) and is it sustainable
  • Is it a product that people will want continuously – not just as a novelty or a gift.
  • Is it more than a Fad – something that will be wildly popular until the novelty wears off.
  • Can its products be protected or will other companies soon be copying them

People can and always will make good money off these types of stocks but they will never make good income from them. For Dividend Income Investors, stay focused !

Thoughts or comments?

 

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