Big Bubbles Are Not Deterring Bullish Investors: Why the Smart Money Keeps Buying

Forget the doom-and-gloom headlines. While skeptics scream 'bubble,' capital is flooding in. The narrative has shifted from fear to FOMO, and the charts are telling a story that fundamentals sometimes miss.

The Psychology of the Peak

It's not about ignoring risk—it's about redefining it. Veteran traders know the most explosive gains often happen when sentiment reaches a fever pitch. The real danger isn't a correction; it's being on the sidelines while the market makes its final, parabolic move. Traditional valuation models? They've been gathering dust since the last cycle.

Liquidity Over Logic

The market isn't trading on earnings reports or P/E ratios. It's trading on liquidity and narrative. Central bank policies and the relentless search for yield in a low-rate world are creating a tide that lifts all boats, leaky or not. When the money printer goes brrr, assets inflate. It's simple physics, or maybe just modern finance—often the same thing.

Where the Bulls Are Placing Bets

Capital isn't just sitting idle. It's rotating into infrastructure—layer-1 protocols, decentralized finance blue-chips, and the interoperability projects stitching it all together. The play isn't just about the next meme coin pump; it's a calculated bet on the digital economy's backbone. The smart money builds the casino while everyone else gambles at the tables.

So, is this sustainable? In the long run, no bubble is. But in the short term, bullish conviction is a force of nature. It bypasses logic, cuts through skepticism, and creates its own reality—at least until the music stops. Just remember, on Wall Street, they call a 'correction' what everyone else calls losing your shirt.

Key Takeaways

• Individual investors remain optimistic despite fears of bubbles and inflation.
• Many bought the dip in the biggest stocks in November.
• AI-related stocks and cryptocurrency top the list of frothy assets.
• Inflation is investors’ top concern.

Almost nothing seems to rattle individual investors lately.

They’ve overcome fears about tariffs, inflation, and a potential stock market bubble, continuing to buy their favorite stocks and ETFs all year long. Despite concerns about economic policy, overvaluations in AI stocks, and rising prices, investors are mostly optimistic about the stock market right now, according to Investopedia’s recent survey. More than 60% describe themselves as either optimistic or cautiously optimistic, while less than a third say they are skeptical or hesitant.

Buying the Dips

The late November selloff across the biggest stocks in the market—like Nvidia (NVDA), Amazon (AMZN), and Palantir (PLTR)—did not deter investor optimism. In fact, it may have emboldened them to buy more, adding to their positions in the most widely held stocks in their investors’ portfolios. According to the Schwab Trading Activity Index, or STAX, Schwab clients took advantage of the drawdowns in those mega-cap stocks and bought the dip at one of the fastest paces in history.

They did so even though the majority of respondents to our survey think that AI-related stocks are in a bubble, and nearly half feel the same way about the biggest tech stocks in the market. More than half also believe cryptocurrencies like Bitcoin are frothy, despite the 25% decline in the price of Bitcoin over the past month.

Headline Risk All Year Long

Investors have had plenty to be concerned about throughout 2025. Whether it was the TRUMP administration’s initially aggressive tariff policies, the rise of Chinese AI model DeepSeek, geopolitical instability in places like the Middle East and Ukraine, or the reliability of government data, headline risk has been the standard all year long.

While this may have contributed to increased volatility in the stock market in recent months compared to the past few years, individual investors have mostly stayed the course with their investment strategies. They pulled back slightly on their investing plans during the tariff tantrums last April, but have steadily returned to their normal allocations across the stock market.

Concerns about recent market events have also been dissipating, a sign that investors have grown accustomed to more uncertainty.

Trusting Markets More than Policy

While individual investors are mostly optimistic about the stock market and their portfolios, their trust in this administration continues to wane, and their concerns that its policies will hurt their investments continue to rise.

Still, most believe in the relentless rise of the stock market, regardless of who might occupy the Oval Office, and expect annual returns of at least 5% over the next three years. That’s lower than the average annual returns of 14% for the S&P 500 over the past five years, but still optimistic.

Where Would You Invest an Extra $10,000?

In yet another sign of investors’ Optimism and risk tolerance, most would choose to invest an extra $10,000—if they had it—in individual stocks. They’ve benefitted from owning many of the biggest and fastest-rising stocks in the market for the past several years, and expect that trend to continue for the next decade.

What's in Our Positions

Individual investors' portfolios closely mirror the top 25 stocks in the S&P 500, or the top holdings in popular ETFs such as VOO (VOO), SPY (SPY), and QQQ (QQQ).

They’ve remained loyal to these stocks, which include the Magnificent 7, as well as banks like JPMorgan Chase (JPM) and conglomerates like Berkshire Hathaway (BRK.B). Many have become millionaires owning these stocks and have continued to buy them throughout this bull market, which began over three years ago.

Pick One Stock to Own for the Next Decade

Their faith in these giant stocks is so strong that not only are they their biggest holdings today, but most WOULD buy and hold the same group of stocks for the next decade.

Old habits die hard—especially when the bull keeps running.