According to recent studies of the stock market, the following risks are seen with hot stocks:
- Initial popularity of a stock can drive up the price, but long-term performance of such stocks is often less than anticipated by investors, resulting in a loss.
- One study shows that hot stocks tended to have a growth rate of little more than half that of less popular stocks.
- Investors who concentrate solely upon hot stocks incur a much higher risk of loss than those who choose to diversify.
- The price of hot stocks often tends to fall as rapidly as it rises, leading to losses for investors.
I hope this is helpful.
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