Investing Fads That Didn't Pay Off (and Some That Did)

TL;DR: Morning Brew published a rundown today of investing fads that fizzled and a few that didn't, from tulip bulbs to Beanie Babies to Bitcoin. The pattern is four centuries old and still working. The question that matters isn't whether the next fad is real. It's whether you priced the hype before you bought it, or after.

What happened

Morning Brew reported today on a string of investing fads across four centuries: tulip bulbs in the 1600s Netherlands, British railway shares in the 1840s, sports cards in the Junk Wax era, Beanie Babies in the late 1990s, and Bitcoin and NFTs more recently. Bitcoin, the outlet noted, was trading north of $80,000 last week, up from roughly $600 a decade ago, while NFT sales went from $82 million in 2020 to $17.6 billion in 2021 before crashing to about $5.63 billion the following year, per data firm Nonfungible.com and CryptoSlam figures cited in the piece.

That's the news. Here's why I keep a file on it.

Why does the same mistake keep working for 400 years?

The tell is the same whether it's a platform review or a four-hundred-year-old bubble: an asset gets popular before anyone can explain why it's worth what it's trading at. I've trusted sponsors who turned out to be frauds and lost real money finding that out the hard way. The lesson repeats because the mechanism repeats: the story arrives before the valuation does, and the story is what gets sold. Morning Brew's own account makes the mechanism plain across two centuries at once: Dutch tulip prices reportedly rivaled mansions at the height of the 1600s bulb bubble, and British investors including Charles Darwin and the Brontë sisters poured money into speculative railway shares in the 1840s, in what became one of the biggest financial crashes of the era.

The cannabis stock craze is a clean modern example. When Canada legalized recreational cannabis in 2018, the market treated it as the start of a global re-rating, and Altria took a 45% stake in Cronos Group for $1.8 billion on that thesis, according to City AM. The leading cannabis index is now down more than 95% over five years, and Aurora Cannabis is down 88.4% since its IPO and 99.6% since its 2018 peak, per the same report. Nobody at the top of that trade thought they were buying a fad. That's the point.

The dot-com era ran the identical playbook at larger scale. "Billions of dollars were poured into virtually any small technology-based business that promised the moon," and most of those companies didn't live up to expectations, according to Educators Financial Group. The same FOMO now shows up wearing a nicer suit: a democratization pitch promising a fad-level access story around a fee stack the investor never sees.

A short history of the pattern

Fad	Era	What happened	Lesson for allocators	Source
Tulip bulbs	1630s Netherlands	Prices rivaled mansions, then collapsed within the year	A price with no cash flow behind it is a story, not a valuation	Morning Brew
Railway shares	1840s Britain	Investors including Darwin piled in; one of history's largest crashes followed	Smart, informed people lose to a good narrative just as often as anyone else	Morning Brew
Football club listings	1990s Britain	Over 20 clubs listed after Man United in 1991; a football-focused fund launched in 2007 and shut five years later down more than 40%	A theme fund built around enthusiasm, not underwriting, is a bet on sentiment lasting	City AM
Cannabis stocks	2018–present	Altria paid $1.8B for a Cronos stake; the leading cannabis index is down over 95% in five years	A regulatory catalyst is not the same as a proven business model	City AM
NFTs	2020–2022	Sales rose from $82M to $17.6B, then fell to $5.63B	Volume and price momentum are not liquidity you can count on later	Morning Brew
Bitcoin	2016–present	Roughly $600 a decade ago, above $80,000 as of last week	Surviving one cycle doesn't retire the diligence requirement for the next asset	Morning Brew

One name on that list didn't collapse: Bitcoin. That doesn't make it safe, and it doesn't validate the next fad. The only way to tell early recognition of a real asset from mania, in real time, is discipline, not conviction.

What actually separates a fad from a real allocation?

A retail trader interviewed by Business Insider said his gains came from watching the market and investing steadily in index funds and known names, not from chasing meme stock hype, according to the outlet's reporting. Fine — but steady index investing is still Wall Street's menu. It's the default most of my readers are already sitting in, not the finish line. The real fad risk for an accredited investor isn't a meme stock. It's the private deal wearing the same costume: a projected 18% IRR pitched like a fact, an interval fund promising liquidity the underlying assets can't deliver, or a "democratized" platform stacking fee layers a retail buyer never sees until after the wire clears. The question isn't whether to leave the menu. It's what you diligence before you add anything speculative to it — public or private.

The distinction I use on every deal I look at is the same one I learned doing QA sign-offs before anything shipped on a submarine: verify before you trust. A fad asks you to buy the story. An allocation asks you to price the downside first, understand what you're actually holding, and size the position so a total loss doesn't sink you. Tulip bulbs, Beanie Babies, and NFTs failed that test. See our data on angel investor returns and portfolio size for what actually holds up once the story wears off, and our allocation framework for where the data supports going.

Common mistakes

• Confusing a rising price with a validated thesis. Cannabis stocks rose before the regulatory and margin questions were answered, not after.
• Sizing a speculative bet like a core holding. The football-club fund that lost 40%+ wasn't a small side bet for the people who bought in at the top.
• Skipping the fee stack because the story is exciting. The same discipline that catches a fad catches a bad fee structure. See our breakdown of PE's 2-and-20 structure for what that costs you in practice.
• Assuming one winner proves the category. Bitcoin's run doesn't retroactively validate NFTs, Beanie Babies, or the next thing that looks like it.

FAQ

Which of these fad stocks actually lost investors the most money? Aurora Cannabis is down 99.6% from its 2018 peak and 88.4% since its IPO, and the broader cannabis index is down more than 95% over five years, according to City AM.

Is Bitcoin a fad or a real asset class? It's the one item on Morning Brew's list that hasn't collapsed back to its starting price, up from roughly $600 to over $80,000 in a decade, per Morning Brew. That track record doesn't make the next fad legitimate by association.

How do I avoid getting caught in the next one? Price the downside before the upside, check the fee stack, and size any speculative position so a total loss doesn't change your plan. The discipline is the same whether it's tulips or a private deal.

Everyone's pitching me deals, how do I say no to the bad ones? Apply the same diligence you'd want on a public fad before you trust a private pitch: who's the sponsor, what's the structure, and what happens if it goes to zero.

What to do with this

Before you add anything speculative this quarter, write down the downside case first, not the upside case. If you can't state it in one sentence, you don't understand the position well enough to size it. That's the same filter the free AIN briefing applies to the deals landing in your inbox every week. Sign up, and we'll keep running it.

Educational content only. Not investment, tax, or legal advice. Not an offer or solicitation to buy or sell securities. Past performance does not guarantee future results. Private-market investments are illiquid and involve risk of loss, including total loss of capital. Consult qualified advisers. Angel Investors Network is not a broker-dealer or investment adviser.