Money Talks News may earn commission or revenue through links in the content below. Our editorial team independently selects all products. Compensation does not influence our recommendations.
Jeff Bezos knows a thing or two about bubbles. He built a company that survived the last big one.
In an interview with Bret Baier that aired on Fox News recently, Bezos was asked whether AI is in an investment bubble. “It’s very hard to know. What I do know is the technology is real,” he said, according to Forbes. (1)
Then he described what happens in these booms: “What happens in these industrial bubbles…speculators can lose money because they’re investing in all of these things.” (1) And: “The inventions don’t disappear when the bubble pops.” (2)
He’s speaking from experience. CNBC reports Amazon’s stock lost more than 90% of its value in two years as the dot-com bubble burst. (3) The Nasdaq peaked on March 10, 2000, then fell to barely 1,100 by October 2002. (3)
It took 15 years for the index to set a new record close. (4)
I lived through and traded markets during that crash, along with Black Monday 1987, 2008 and the 2020 pandemic crash. Ove the years, I’ve made millions in stocks. So I’ll say it plainly: Bezos is right. And his warning matters most for people who don’t have 15 years to wait.
Here are 5 rules I’d follow if you’re retired or close to it.
1. A real technology can still be a terrible investment
The internet was real. It changed everything, just like the bulls said it would. Amazon survived and became a giant.
But if you bought at the top, being right about the internet didn’t help you for a long time. Per CNBC, Amazon’s stock “struggled to outperform its dot-com era highs throughout the 2000s.” (3) And Amazon was one of the winners.
That’s the trap Bezos is describing. The invention can win while the people who paid too much for it lose.
2. Ask yourself what a 15-year wait would do to you
If you’re 45 and the market takes 15 years to come back, that hurts, but you’ll recover. If you’re 70, that same wait takes you to 85.
And many retirees aren’t just waiting. They’re withdrawing. Selling shares to pay the bills while prices are down locks in losses. Those shares are gone before the market recovers. That’s the real danger of a bubble for someone living off their savings.
Quick gut-check — if your money advice is coming from random online influencers, you’re playing a dangerous game. I’ve been a CPA since 1981 and writing about money since before the internet existed. Sign up for the free Money Talks Newsletter and get expert advice that’s been tested by time.
3. Keep the speculation small
Bezos himself says it’s “very hard to know” whether we’re in a bubble. (1) If the man who built Amazon says it’s hard to know, I’d be careful assuming you or I know better.
So here’s my rule: if you want to bet on the hottest theme of the day, use money you could lose without changing how you live. For most retirees, that’s a small slice, not the core of the portfolio.
4. Own the haystack, not the needle
Bezos’s best point is that the inventions survive. You don’t have to guess which company ends up owning them. A broad, low-cost fund lets you own a little of hundreds or thousands of companies, including winners you’d never think to pick.
If you’d rather spread your money out than pick one stock, there are easy ways to do that. You don’t have to be a millionaire or know everything about the stock market to start investing.
SoFi® Active Invest lets you get started with as little as $5, with no account minimums.
And if picking individual stocks feels like a lot, you can start with a collection SoFi has already put together and spread your money across a mix of companies. Check it out here.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUEBrokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org).
5. Get a second set of eyes before you chase anything
When a market gets hot, the biggest risk is often the one you can’t see: how much of your money is already riding on the same idea.
If you’ve got big profits in stocks, this is the perfect time to get a second set of expert eyes. A fiduciary advisor can look at the whole picture, not just the hot stock. One way to find one? SmartAsset matches you with up to three fiduciary advisors, all legally required to put your interests first.
They can help with everything from investment advice to Social Security claiming strategies to estate planning and more.
SmartAsset makes the match rather than giving advice itself. The free questionnaire takes about 10 minutes and asks for a phone number near the end.
Have $100K+ in investments? See which advisors you're matched with.
My honest take
I’ve watched a lot of manias come and go. Every one of them started with something real, and every one of them ended with people who were right about the future and wrong about the price.
Bezos isn’t telling you to sell everything, and neither am I. He’s telling you the technology will outlast the hype. That’s true.
Your job, especially in retirement, is to make sure your savings outlast it too.
Add a Comment