“Gotta catch ‘em all!” The Pokémon craze has once again caught fire. It’s hard not to turn around and see people frantically dashing in the streets to catch Pokémon. After being a mega hit in the late 1990’s, the billion dollar video game franchise has reinvented itself with its first ever Pokémon mobile app.

If you’ve never heard of Pokémon, here’s a brief run down. Your goal is to catch Pokémon – short for pocket monsters. Pokémon are caught with Poké Balls. Pokémon aren’t just to collect – you can train them so that they evolve and gain new moves and abilities. Trainers battle it out to see who’s Pokémon come out ahead.


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The Roller Coast Ride of Pokémon GO

When Pokémon GO was launched in the U.S., Nintendo’s market capitalization more than doubled to 4.5 trillion yen (US$42.5 billion). Pokémon was hailed as a mega success, helping make Nintendo relevant again. Pokémon GO became the number one downloaded smartphone app. Investors couldn’t get enough of Nintendo, buying up its shares in record numbers. Things were rosy at Nintendo.

Unfortunately for Nintendo and investors, the celebration was short-lived. Nintendo’s stock looks a lot like a roller coaster in July. In fact, last week was the worst week for Nintendo’s stock in 27 years. Nintendo’s shares plummeted 27 percent on news that the launch of a highly anticipated Pokémon GO accessory would be delayed until September.

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This isn’t the only reason Nintendo’s stock is down. When Pokémon first came out, it was assumed Nintendo would be raking in the Poké profits. However, it was soon revealed Nintendo isn’t going to directly profit from Pokémon GO. That’s because Nintendo didn’t develop or publish the game. Furthermore, Nintendo only has a share the Pokémon company and Niantic, the masterminds behind Pokémon GO.

That’s not the only concern of Pokémon GO. Monetizing smartphone apps has always been challenging. Pokémon GO is no exception. Pokémon GO is a free app, so Nintendo doesn’t make money from downloads. However, Pokémon GO does have in-app purchases. Players can purchase Poké Coins, which can be exchanged for various in-game power-ups and upgrades. It remains to be seen how successful the in-game purchases will be.

Pokémon GO and Investing

Since this is a personal finance blog, you’re probably wondering what Pokémon GO has to do with investing. Pokémon GO and investing have more in common than you think. A lot of parallels can be drawn between the rise and fall of Nintendo’s stock and the dot-com bubble.

During the height of the dot-com bubble, the Price-to-Earnings ratio for some companies were really out of whack. This should have raised a red flag for investors, but most chose to ignore the warning signs. When it was discovered a lot of dot com companies were just operating out of a garage in Silicon Valley and weren’t actually making money, it led to the dot-com crash


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The dot-com bubble and Pokémon GO serves as a valuable lesson for investors. Follow Peter Lynch’s golden rule and invest in only what you know and understand. If more investors had of done their homework and looked at the balance sheet of Nintendo, they would have realized Nintendo wasn’t going to make a mint off of Pokémon GO. Hopefully this serves as a wake-up call for investors that you shouldn’t rush into the next hot stock without truly understanding the fundamentals.

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