Over the past few months, I've noticed a common theme emerging in many of the conversations I've been having with clients.
The specific investment changes from one conversation to the next.
Sometimes it's artificial intelligence. Sometimes it's Nvidia. Sometimes it's another company dominating the headlines. Most recently, it was the SpaceX IPO, when a 94-year-old client living on a fixed income asked whether he should sell some of his blue-chip dividend stocks to buy this futuristic growth company.
But the underlying question is almost always the same.
"My friends are making so much money. Should we be taking more risk?"
"I know when the market was falling I said I didn't want to risk losing too much money...but I think I've changed my mind."
"My friend keeps telling me AI stocks are just going to keep going up. How much AI do we own?"
They're fair questions. In fact, they're exactly the kinds of questions you'd expect after watching certain investments produce extraordinary returns while the financial media reminds us of them almost daily.
The interesting part is that these conversations aren't really about artificial intelligence, Nvidia, SpaceX, or whatever happens to be capturing investors' attention at the moment.
They're about something much more timeless.
Human nature.
Because while markets evolve, people don't.
Every time I have one of these conversations, I'm reminded of one of the greatest scientific minds to ever live.
Sir Isaac Newton.
Most of us know Newton as the man who discovered gravity, developed calculus, and forever changed our understanding of the universe.
What far fewer people realize is that he also lived through one of history's greatest financial manias, the South Sea Bubble of 1720.
As excitement surrounding the South Sea Company spread across England, its stock price soared. Fortunes seemed to be made overnight. It felt as though everyone knew someone who was getting rich.
Newton invested early.
Then he did something remarkably disciplined.
He sold. He walked away with a substantial profit.
By almost any standard, it was a tremendous investment.
The story should have ended there.
But it didn't.
The stock kept climbing, and he watched people around him continue getting richer.
Eventually, even one of the greatest minds in history began asking himself the very same questions I hear from clients today.
Did I get out too soon?
Should I be taking more risk?
What if this thing just keeps going?
Nearly every investment decision can ultimately be traced back to two powerful emotions.
Fear and greed.
We tend to think of fear as the emotion that drives investors to sell during market declines.
Greed is more subtle.
It disguises itself as logic.
Everyone else is making money.
Maybe this opportunity really is different.
Perhaps just a little more risk couldn't hurt.
In Newton's case, greed didn't look reckless. It looked perfectly rational.
So, he did what countless investors before him, and since him, have done.
He abandoned his discipline. He bought back in.
Near the top.
When the bubble inevitably burst, Newton reportedly lost a fortune, the equivalent of millions of dollars in today's purchasing power.
Afterward, he famously remarked:
"I can calculate the motion of the heavenly bodies, but not the madness of people."
Think about that for a moment.
One of history's greatest minds wasn't defeated by a lack of intelligence.
He was defeated by the same emotions that have driven markets for centuries.
Fear.
Greed.
The fear of missing out.
The temptation to compare our results to everyone else's.
The belief that because prices have continued rising, they'll continue rising forever.
Three hundred years later, the technology, the companies, and the headlines have all changed.
Human nature hasn't.
Whether it's railroads, automobiles, the internet, cryptocurrency, or artificial intelligence, every generation believes its opportunity is different. Many of those innovations ultimately changed the world.
But history reminds us that revolutionary technology and disciplined investing are not mutually exclusive. In fact, discipline often matters most when enthusiasm is at its highest.
That's why, when clients ask whether we should own more of whatever has been leading the market, my first instinct isn't to focus on the investment itself.
It's to focus on the question behind the question.
Are we making a thoughtful, long-term investment decision?
Or are we simply becoming uncomfortable watching someone else make money without us?
Those are two very different motivations.
The conversations I've been having lately aren't really about AI.
Or Nvidia.
Or SpaceX.
They're the same conversations investors have been having for centuries.
The names change.
The technology changes.
The opportunities change.
Markets evolve.
Human nature doesn't.
That's why, at Perennial, we spend far less time trying to predict what the market will do next than we do helping clients recognize the behavioral traps that history has repeated time and time again.
Because markets have always been easier to understand than people.
Even for the man who figured out gravity.
This material is for general information and educational purposes only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk including the loss of principal. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.