Lately, almost every conversation I have with clients, friends and family members seems to arrive at the same place: “What do you think about this AI stock?” or “Should I try to get in on the SpaceX IPO?”

It’s easy to understand why. We’re in the middle of one of the most exciting market stretches in years. Artificial intelligence and semiconductor stocks have driven the major indexes to record highs, and the enthusiasm is hard to miss—one well-known chipmaker is up roughly 130% this year alone, trading at a valuation that bakes in years of flawless growth. At the same time, some of the most talked-about private companies in the world—SpaceX, OpenAI, and Anthropic—are moving toward the public markets, in what could become the largest wave of IPOs in history. Investors are so eager that some have been trying to buy shares on secondary markets before these companies even list.

When markets move like this, a powerful emotion takes over: the fear of missing out (FOMO).

When the tip comes from a brother-in-law

Here’s the pattern I see again and again. Someone hears from a friend, a coworker, or a family member who “doubled their money” on a hot stock or got in early on the latest trend. Suddenly the worry isn’t about losing money—it’s about being the only one at the dinner table who didn’t participate.

To their credit, many people don’t buy completely blind. They’ll pull up the stock, glance at the chart, and check the analyst ratings. They see a row of green “Strong Buy” recommendations and a price target promising 40% upside, and they feel like they’ve done their homework. Then they buy.

The trouble is that, in my experience, very few of these decisions get more than about ten minutes of real attention. And the single piece of information people lean on most—the analyst rating—is the piece most likely to be misunderstood.

The Wall Street scoreboard is tilted

Analyst ratings are not useless. Analysts build detailed models and often understand an industry far better than the rest of us. But a one-word rating was never meant to be the whole story, and the scoreboard is more lopsided than most investors realize.

Heading into 2026, of roughly 12,700 analyst ratings on S&P 500 companies, about 57% were “Buy,” 38% were “Hold,” and fewer than 5% were “Sell.” In other words, a genuine sell rating is one of the rarest things on Wall Street.

That isn’t because almost every company is a wonderful investment. The reasons are structural. Analysts depend on continued access to the management teams they cover, and a sell rating tends to close that door. “Hold” is widely understood, with a wink, to mean “sell.” And there’s a well-documented pull toward optimism and toward staying near the consensus, because being wrong alongside everyone else is far safer for a career than being wrong alone.

None of this requires anyone to act in bad faith. It simply means the ratings lean bullish by design, and the rare downgrade often arrives after the damage is done rather than before it. A “Strong Buy” tells you what a professional thinks, filtered through those incentives. It does not tell you whether you should own that business at today’s price.

Buy the business, not the ticker

This is where Warren Buffett and Charlie Munger have been saying the same thing for decades: when you buy a stock, you are not buying a flashing symbol on a screen—you are buying a piece of a real business. Munger’s advice was always to understand what you own before you own it, and to stay within what he called your “circle of competence.”

You don’t need a finance degree to do this. You just need to answer a few honest questions before you buy:

• Have you ever used the product or service, and what did you think? This is your built-in advantage as a customer.
• Why is this a good business? What does it sell, to whom, and what stops a competitor from doing the same thing more cheaply next year?
• Do you understand the basic financials? Are revenue and earnings actually growing or shrinking? Is the company profitable, or burning cash? How much debt is it carrying, and could it survive a difficult year?
• At this price, is the business worth it? A wonderful company can be a terrible investment if you overpay. Do you have sufficient understanding to make a reasonable estimate of the value of this company?

We research a jacket harder than a stock

I find it striking how much more carefully we shop for almost everything else. We’ll wait for an end-of-season sale, compare three websites for the same jacket, and stack a coupon on a markdown to save twelve dollars on a sixty-dollar purchase. We’ll happily spend an hour on that.

Then we’ll put thousands of dollars into a company whose income statement we’ve never opened, on the strength of a rating and a friend’s good fortune. The jacket got an hour. The four-thousand-dollar decision got ten minutes and someone else’s opinion!

A recent example makes the point. Peloton was a product millions of people knew and loved, and analysts carried buy ratings as the stock soared and the company’s value topped $50 billion in 2020. But “I like the bike” was never the real question. The real questions—would home-fitness demand survive the reopening, was the company profitable, and was any of that worth $50 billion?—were answerable by anyone who read the financials. The stock now trades roughly 96% below its peak. A row of “Buy” ratings said far less about Peloton’s future than a few minutes with its income statement would have.

Concentration can work—if you’ve earned it

So should you ever make a big, concentrated bet on a single stock? Sometimes, yes. Concentration is how some of the great fortunes were built. But it only tilts the odds in your favor when it’s paired with genuine understanding—when you know the business well enough to hold on through a 50% drop because you understand what you own and why.

If you have that depth of knowledge, a focused position can absolutely pay off. But if you don’t—and most individuals don’t have the time to develop it on every trend that comes along—the honest answer is to lean on low-cost index funds or a trusted professional. The data is sobering: the majority of individual stock-pickers underperform a simple index fund over time. Diversification isn’t an admission of defeat; it’s an acknowledgment that the odds are stacked against the part-time stock picker, and that long-term success comes from staying invested, not from catching the next hot name.

The Bottom Line

There is nothing wrong with being excited about innovation, and there’s nothing wrong with owning individual stocks. The danger is letting FOMO and a green “Buy” rating stand in for understanding. Before you put real money into the next hot stock or IPO, ask yourself whether you truly understand the business—or whether you’re simply afraid of missing out. If it’s the latter, a diversified, disciplined approach will almost always serve you better over a lifetime of investing than chasing the trend of the moment.

Give your portfolio at least the same hour you’d give a good sale!

– Arash Navi, CFA®, CPA, CFP® | Senior Wealth Manager

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If you’re wondering how the current AI and IPO excitement fits into your own financial plan—or whether your portfolio is positioned for the long term rather than the headline of the week—we’d be glad to talk it through with you.

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