Retail traders just set an all-time record for buying stocks in a hurry. Citadel Securities, one of the biggest firms handling those trades, says May volume was double what it saw two years ago. Then June topped it.
Nine of the ten busiest days in the firm’s history landed in that one month. The single busiest day ever was June 12 — the SpaceX IPO. An IPO — initial public offering — is a company’s first day selling shares to the public.
Since that day, every SpaceX share offered has been bought and sold more than four times, on average. All that racing around, and the stock still dipped below its opening price eleven days later.
The leveraged funds built to double its daily moves? Deeply underwater. Leverage — borrowed money stacked on a bet — doubles the pain just as happily as the gain.
None of this made the buyers bad people. It made them early. Early is expensive.
The history lesson
We have seen this movie before. Facebook’s 2012 debut was the biggest tech IPO of its time. The Journal ran stories about people putting college funds into it.
By that August, Facebook had lost more than half its value.
Amazon got the same treatment in 1998, when a famous analyst call sent the stock vertical. Within three years it had dropped more than 80%.
Here is the part that matters. Both stocks turned out to be all-time greats — for the patient. There was never a hurry. A genuinely great business is still great after the confetti settles, and often cheaper.
Nobody rang a bell at the bottom either time. The patient did not need one.
Why smart people rush
FOMO is not stupidity; it is wiring. Losing money hurts more than making money feels good, and a missed opportunity registers in the brain as a loss.
A 2022 study of Robinhood users showed how easy that wiring is to exploit. Simply displaying the day’s top-moving stocks made people trade those stocks.
The results were ugly. The chased names posted sharply negative returns over the following month, compared with the market. The app’s attention machine got paid; the investor paid for it.
And nothing grabs attention like a hot IPO. The research is blunt: people who buy after a stock starts trading — which is nearly everyone — tend to lag the market for the first few years.
Our slow rule
So the Capital Wealth Growth Portfolio has FOMO-resistance built into the process, on purpose.
Any position worth owning is worth owning after a 90-day cooling period. If the business is real, 90 days changes nothing but the price — often in our favor. Lockups and gravity do our negotiating.
New names enter at a starter weight — a deliberately small first position — and never bigger. The watchlist exists so excitement has somewhere to go that is not the buy button.
Stocks are not a doorbuster sale. There is no ‘while supplies last.’ The market has plenty of shares for the patient — it only charges extra to the people in a hurry.