A painful lesson is playing out in real time right now across the stock market.
Investors who have chased dozens of popular stocks and ETFs are now watching them come crashing back down. They fell into the trap of the “Hot Dot,” throwing out all the lessons from legends like Warren Buffett and Benjamin Graham.
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It’s not that traders aren’t nimble. In fact, new, nimble traders enter the market every day thanks to unprecedented access to high-quality investment data, such as the treasure trove available here at Barchart.com.
Instead, it’s that the temptation to buy a stock or ETF simply “because it is up” is a natural, human emotion.
Some would conclude that it’s retail investors falling prey to the “Hot Dot” trap, buying 52-week highs with reckless abandon. In my experience, it’s just as likely, if not more so, that professionals are stoking the “Hot Dot” flame. Advisors and money managers get paid to perform. Sometimes, that means their last resort is to chase.
They call it “avoiding career suicide,” since they realize that clients will ultimately look at the S&P 500 Index ($SPX) as a benchmark, even if it does not bear much resemblance to their tolerance for risk. Such is life in modern, algorithmic-driven markets where the major indexes suck much the air out of the room.
The crowd loves a winner, especially when it’s moving straight up. When an asset starts hitting new highs day after day, it creates a powerful urge to jump in.
People see the big gains and convince themselves that the upward move will never stop. Late-stage buyers rush in at the absolute peak of popularity, assuming yesterday’s performance guarantees tomorrow’s returns. This was the epitaph of the dot-com bubble, and many cycles before it.
Some recent examples might help deliver a “scared straight” feeling that I hope inspires readers to second-guess their trading decisions. It was not long ago that these ETFs and stocks were flying. And now? Look at them.
How Silver Lost Its Golden Touch in Record Time
First, we’ll look at silver, in the form of the iShares Silver Trust (SLV), an ETF that tracks the price of that commodity. That’s nearly a double and then a halving, just during 2026 alone. When a stock price rises like one half of an isosceles triangle, it is time to double-check your research to make sure the other side isn’t coming next. As it did here, as well as with ETFs that track baskets of silver stocks.
