The greater fool thesis stipulates that you can profit from investing in high flying, overpriced stocks as long as there is a greater fool than you to buy the investment from you at a higher price. Eventually, you run out of fools as the market for any such investment collapses. Investing according to the greater fool theory means ignoring valuations, earnings reports, and all the other data. Ignoring data is as risky as paying too much attention to it, and so people ascribing to the greater fool theory could be left “holding the bag” when no more fools can be found and prices correct. There is a sickening feeling associated with realizing that the greatest fool is you.
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