One of the most alluring and dangerous investments is fad investments. These stocks offer the prospect of a quick return, but that return can disappear in an instant. They take several forms where the company sells a faddish product like clothes or the stock gets caught up in a strong momentum swell, or both. It can be particularly dangerous to be leveraged in these trades. It is hard to know how long the fad will last, and a single event like an after hours earning report can sink the stock.
These trades are the opposite of a long-term investment that compounds over years. They are also risky and time-consuming, because you have to constantly monitor them waiting for the momentum to change.
