“FOMO with the Stock Market”

“Fear of Missing Out” (AKA FOMO), has become very apparent as individuals try to make sense of the meteoric rise in the stock market over the past 60 days.  We dive into why the stock market has been going up in a recent post which may help to explain the confusion between market performance and economic performance.  Many people have asked which stocks we expect to outperform the market and when they should jump back into stocks.  The short answer is that we think it is the wrong questions to be asking in the first place.  The longer answer is what we will dive into below…

Individual Circumstances and Long-Term Plans

Rather than asking which stocks are the right ones to invest in, the better question is what are my personal financial circumstances and long-term investing goals and do individual stocks play a part in those?  As we have stated in previous posts, your personal plans and goals should always outweigh the news headlines of the day.  Does this mean the news headlines are unimportant altogether?  Certainly not, but they should be viewed through the lens of your situation, and if your situation warrants, they can be capitalized on.  By revisiting your personal plan on a regular basis, you can keep a long-term perspective which is vital to any investing decision.

Slow and Steady Wins the Race

It is not always the exciting thing to talk about, but it bears repeating when we see volatility across the stock market.  A slow, methodical, and consistent approach to investing produces incredible results in the long term.  Rather than post another statistic about how saving $XX each month at X% interest rate would produce $XX in 40 years I would instead encourage you to reach out to someone you know who has actually done it.  Sure, it can be motivating to see how compound interest works and your money can grow, but it motivates us for 10 seconds and we go back to our normal way of living next month.  However, speaking directly to someone who has actually followed through on an investment plan for an extended length of time tends to be more “real” and impactful.

FOMO has a high price to pay

You only have to look at 2008, the end of 2018, and now the beginning of 2020 to see what FOMO could have done to someone’s investment portfolio.  If you would have chased the latest stock tip at those moments, there is no telling how much money you could have lost.  Looking at what other people are doing and feeling like “change = getting ahead” could not be further from the truth.  Jumping around to different strategies and stock tips usually leads to frustration and the comparison game which is not helpful.  Leaving these decisions to smart money managers of a mutual fund or low cost index funds is a great way to take the stress out of these investment decisions.