Nov 2002
. . . there seems to be something about the mixture of logic and emotion in most investors’ heads that pretty consistently prevents investors from accepting the validity of the relationship between popularity and risk. Popular stocks (and bonds) are risky precisely because their popularity drives their prices upward to the point that they become risky. We cannot, dear clients, do the popular thing and still expect to earn above average investment returns. Conversely, unpopular investments are frequently not as risky as they may seem, because their lower prices often remove significant risk.