Investors are easily fooled by buzzwords, sound bytes, memes, and Wall Street knows it. Everyone is chasing the next big thing, and Wall Street is happy to take your money for admission to the show. Wall Street’s investment bankers will drum up hype and throw out buzzwords to drum up interest in an IPO.
Investors are constantly falling for Wall Street’s bait and are constantly losing money.
One of the Street’s favorite buzzwords to throw around pre- and post-IPO is:
“__ billion dollar valuation.”
By saying such and such company has a $3 billion valuation, Wall Street wants you to assume that you’re looking at a valuable company. What they don’t tell you is that value means nothing. It just means what the value of the company’s stock would be worth today based on investor interest and not on anything tangible.
Back during the dot-com era of the early 2000’s, multiple companies were getting billion-dollar valuations before even hitting the market with any tangible product or service. The billion-dollar valuation words are still being abused by Wall Street, and investors are still getting sucked into losing billions.
Here is a list of some of the biggest failures of companies that once boasted billion-dollar valuations but crashed and burned:
- Theranos
- WeWork
- Juicero
- Quibi
- Plenty
- Essential Products
- Zume Pizza
Add to the list the latest unicorn to fail: MedMen. Six years after an IPO that saw its valuation peak at over $3 billion, cannabis retailer MedMen is worth next to nothing after filing for bankruptcy.
MedMen is the latest reminder for investors not to chase trends and hype when making investment decisions. Don’t fall for Wall Street buzzwords like billion-dollar valuations and unicorns when deciding to part with your hard-earned money.
In the case of MedMen, the hype surrounded cannabis. There have been other unicorns, and there will be more to come in the future. Recently, there has been hype over plant-based meat and EV companies, and in the future, there will surely be hype surrounding AI companies. It won’t matter because, as long as there are suckers in the market, Wall Street will find something to lure them.
Smart investors are able to ignore the hype and buzz fueling companies pushing fleeting trends. Instead, they rely on time-tested assets that offer certainty.
For sophisticated investors, assets like commercial real estate and investments in income-producing private companies offer a multitude of benefits that chasing unicorns cannot offer. Besides stability and longevity, these proven assets offer benefits ideal for creating, growing, and preserving wealth.
Smart investors avoid trendy investments in favor of assets that are part of long-term, established trends. Eschewing billion-dollar valuations in favor of million-dollar returns is how sophisticated investors build wealth.
Instead of chasing the “next big thing,” here are the values that smart investors live by:
- Separate From The Herd. The herd chases speculative assets that only leave them broke. Smart investors prefer boring but tangible assets—assets like real estate and private businesses that grow in value over time.
- Passive Income Is The Key. Income from passive real estate and private equity investments is how the wealthy make money in their sleep, and not only can they make it in their sleep, but they can expand these passive streams of income without the need to find more hours in the day.
- Think Long-Term. When it comes to investing, thinking short-term is poison. Liquid investments like stocks play into the short-term investment windows of the average investor. It’s this liquidity that creates Wall Street volatility and risk. Smart investors avoid this risk by thinking long-term and investing in long-term assets like real estate and private businesses.
- Don’t Forget Tax Benefits. Passive investments in real estate and companies structured as partnerships offer multiple tax benefits, including deductions, depreciation, long-term capital gains treatment, and the avoidance of self-employment taxes.
Chasing unicorns will only make you poor. Don’t get suckered in by Wall Street buzzwords like billion-dollar valuations to invest in companies with no track record of success.
Instead, invest in assets with a long track record of success. They may be boring and may not attract labels like unicorns or billion-dollar valuations, but they can make you rich and give you the financial independence you seek.
Learn more about the time-tested assets that offer only certainty.
