When an unsavvy investor blows her money in equities trading.
It's a term referring to people who invests carelessly or takes greater risks than necessary to achieve their desired return.
So...when Debbie hears that inflation will eat away the value of her dollar over time, she decides she wants to invest her money to earn just enough to protect against inflation. Not knowing what she's doing, she throws a bunch of cash into emerging markets and takes a bath on her investment. She's taking a single, untested step into a new world...kinda like a barefoot pilgrim.
Related or Semi-related Video
Finance: What is the Greater Fool Theory...11 Views
Finance a la shmoop what is the greater fool theory? Oh shiny rocks, tulips,
Bitcoin.....The basic idea in the greater fool theory is
that you're a fool I'm a fool were all fools in the mosh pit [Man standing in a moshpit]
right here and we've all done and will continue to do stupid things like paying
$7,000 for a tulip one that just um you know sits there it doesn't speak it
doesn't divine the future just sits there nor does it guarantee lifetime you [Man eating a tulip]
know sexual prowess if you eat it it doesn't even reproduce in a particularly
virile manner, it's just a tulip well a short term store of wealth that one fool paid
7 grand for making the big bet that there's another fool even more motley
foolish who will pay 8 grand and in Holland a few hundred years ago there
was one clapping wooden shoe wearing blond paid 9 grand for this tulip and [Man carrying tulip]
then another even greater fool paid 10 grand and then another fool paid 11
grand and so on until this most foolish of all tulips sold for $26,000 then what
there another fool well no there wasn't then the flower stopped selling for
$26,000 and probably ended up selling for about 26,000 cents yeah there were
no more fools even greater than the ones that came before so the price plummeted [Person removes price label of tulip]
back to I don't know what was it 4 cents a tulip actually sold for for a normal
tulip back then it's about what it was intrinsically worth and well that was
all she wrote or germinated or whatever the greater
fool theory posits that there is always a greater fool out there to buy your
stuff at a higher and higher price until there isn't a greater fool out there
yeah it's sort of the game of hot potato where you benefit only by holding the [Woman and man juggling a hot potato]
potato usually a very short period of time before dumping its finger burning
love on to someone else who's foolish enough to catch it and the greatest
thing about the greater fool theory... Well we're a planet with lots and lots and
lots of fools...
Up Next
A phishing scam is a con in which someone is contacted online in an attempt to procure money or personal information. We'd never do that. In fact,...
Laissez faire is a French term meaning "let it be." In other words, the economy is smarter than we are, and can determine what's fair.
A penny stock is a stock that trades for an extremely low value or amount of money per share.
Painting the tape is an illegal way to manipulate stock prices. And yes, it’s still illegal, even if you paint it super pretty.