I’ll have to admit that A&E’s Storage Wars amuses me. Don’t tell my husband. He’s the one that fills up our DVR with episode after episode. I’m not obsessed with eccentric teams of scavengers competing at storage locker auctions in the hopes of striking it big. I always grumble a little when my husband decides it’s time to catch up on his viewing, but this is mostly hot air and I end up sticking around to see what happens.
Let’s be honest, there is something intriguing about bidding on a storage locker with very little information on the contents inside and then watching as the real-life treasure hunters tally up their booty. Needless to say, not everyone is a winner.
I was discussing my guilty pleasure with a friend over lunch today and she mentioned that television’s Storage Wars inspired her uncle to try his luck at local storage auctions. Now auctions are a part of his weekend ritual (although he’s yet to take the plunge and buy one).
I’m betting that her uncle wouldn’t have his Saturdays booked up if not inspired by the characters and story lines of reality TV. He says they are truly a sight to be seen. There are a ton of people there and you need to come with several thousand in cash to turn from spectator to participant ... something that’s probably happening more often thanks to cable tv.
This got me thinking…crowded auctions can have a lot in common with “flavor of the month” investments. This week, people may be clamoring to participate in the Facebook IPO. In the late ‘90s, the tech boom spawned plenty of “get rich quick” investing stories. We all know the lessons of real estate investors that jumped in at the wrong time a few years ago. Have you noticed how the appreciating price of gold launched online companies, commercials, and kiosks in the mall?
Following the crowds can be a threat to you as an investor whether bidding on storage lockers or trading on a stock exchange. When there is artificial demand in the game, a locker with an intrinsic value of $1,000 may double or triple in price. Markets may be bid up as well, which might result in investors overpaying for the fad of the day.
If you’re new to the game, without a process or guidance, the threat of missing out may prompt you to act irrationally or follow the crowds. Luckily, unlike in Storage Wars, when it comes to investing you don’t have to bid blindly. And if you’re careful, you’ll never get stuck with a whole heap of something you didn’t mean to buy. Especially if you have a game plan (read: process) going in, or at least some professional help!
Any information is not a complete summary or statement of available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Past performance may not be indicative of future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected.