By Rob Schulz
My spring skeet league starts next week, so I dropped into Academy Surplus during lunch today to grab some 12-gauge shotgun shells. The place was an ammunition circus. Lucky for me, a truck had arrived earlier that morning, so I was able to purchase my two-box allotment.
For most of the pandemic, ammunition of all kinds has been scarce. Why? The simple answer is a massive demand that far outweighs the supply. Apparently, there are people able and willing to buy as much ammunition as they can find. Some are hoarding it in their garages out of fear of apocalyptic zombies, gun law changes or both. Others are reselling for a profit.
A similar phenomenon occurred around another commodity much closer and dearer to my daily quality of life: toilet paper. Fortunately, the toilet paper crisis of 2020 has subsided, but who knows what crazy crisis people will think up next?
In the investing world, we have had some similar instances of over-demand. Take bitcoin and all of the various cryptocurrencies. There is very little reason for any cryptocurrency to have much value at all. Yet, their prices move in tremendous swings based solely on how bad people want to own it. Some of this bizarre behavior has recently landed on random stocks that get pumped up on internet boards by part-time investors looking for a quick buck.
What does all of this have to do with anything? Absolutely nothing. Avoid investing in something solely out of hope that somebody else will want to pay more for it. I know that’s a strong statement and that all of my previous examples disprove it. Still, I’m talking about long-term, real accumulation of wealth, not the quick and fleeting temporary gains many people seem to be enamored with.
Try to invest in things that have value, and they will be more likely to hold their value over the long term. It doesn’t matter if it’s a nice piece of real estate, a company or a fine work of art. Time and time again, we get rudely reminded that value is much more important than demand.
Rob Schulz is a local Certified Financial Planner and author of “Thoughts on Things Financial: Your Guide to a Chaotic Money World.” He can be reached at firstname.lastname@example.org. Buy his book here: https://www.schulzwealth.com/book/
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