Is Following Elon Musk A Viable Investment Strategy?

Tesla Inc TSLA CEO Elon Musk moved markets again with his purchase of a 9.2% stake in Twitter Inc TWTR. News of Musk’s investment pumped Twitter’s share price up about 30% as of market close on Monday.

This isn’t the first time Musk has sparked major price movements in companies he’s shown interest in. On January 26, 2021, Musk posted a one-word tweet “Gamestonk!!” with a link to the r/wallstreetbets subreddit, causing the GameStop Corp’s GME already inflated share price to soar another 50%.

Earlier that same day, Musk gave Etsy Inc ETSY a 9% boost by simply posting a tweet saying “I kinda love Etsy.”

His most notable influence, however, is what earned him the title “The Dogefather.” It appears anytime Musk feels like boosting the value of his Dogecoin DOGE/USD holdings, he can simply post a meme with a picture of a dog.

Last month, Musk posted in a Twitter thread advising followers to own “physical things” when inflation is high but added that he wasn’t going to sell his Bitcoin, Ethereum or Doge. Just that little reassurance caused a temporary spike in the price of Doge.

Related: Elon Musk Recommends Investing In 'Physical Things' - Here Are 3 Physical Assets That Perform Well During High Inflation

Investors that have acted quickly on Musk’s tweets and investments may have pulled off some wins, but, in most instances, only as long as they got out of those investments quickly instead of holding.

The first wave of investors to react to Musk’s GameStop tweet last January would still be up about 8% today if they’re still holding, but investors that were a day late would be down over -53%.

Anyone that bought Etsy the day Musk tweeted about it would be down over -33% today if they’re still holding.

Most investors would fare better by investing in assets that have a proven track record of strong returns, instead of jumping on trends spurred by a tweet or based on an influencer’s unique investment strategy.

An investment in the Vanguard S&P 500 ETF VOO on January 26, 2021, instead of GameStop or Etsy, would be up about 18% today with a total return of approximately 21%.

Several alternative investments have done even better. The Total Collectable Index (^CLCTBLS.REGA) is up almost 18% since the start of prices being tracked in July 2021, with Trading Cards (^CARDS.REGA) leading the category at almost a 30% gain.

The Artprice Contemporary Art Index is even more impressive, being up nearly 31% since last January. Contemporary art has even outperformed the S&P 500 for the past 25 years.

See also: Benzinga’s top art offerings.

Assets like real estate are more difficult to track by day or month, but the strong historical returns have proven that real estate can be a wise investment. Real estate crowdfunding has generated average total returns of 10.5% to 25.65% for investors.

See also: Benzinga’s top real estate offerings.

This is just a small sample of a long list of investments that have proven to outperform those based on hype.

Most successful investors follow a strategy based on choosing assets with real value, buying those assets at the right price and ignoring all the noise from what everyone else is doing. While it may be fun to try capturing some short-term gains from fast price movements, most traders end up on the losing end of that action.

While Musk certainly has influence over short-term market movements, his tweets and investments outside of his own companies have yet to create any real value for most of his followers.

Photo by Heisenberg Media on Wikimedia