Don’t Succumb to the Fear of Missing Out
- July 25, 2022
- Financial Planning, Investing, Wealth and Investment Management
If you’ve followed markets or financial news, especially in the past few years, you may have come across the term “fear of missing out,” commonly abbreviated to FOMO. When markets keep going up, FOMO can start to creep in. It can start to feel like you’re leaving gains on the table by not rebalancing your portfolio to include the ultra-high growth assets that saw big jumps. The desire to get as much as you can from your assets is normal, but if you let it influence your decisions, you could end up risking more than you can afford. In the event of pullbacks, you may not have the time needed to benefit from a rebound.
The age-old saying, “past performance doesn’t indicate future results,” is all too true. Especially now, when we’ve seen the years of historic market gains seemingly come to an end, it comes as a reminder that markets don’t always go up, and the value of protection and safety in your retirement investments is of the utmost importance.
How To Avoid The Fear Of Missing Out
FOMO is a mindset that’s fueled by emotion, so it’s important to keep your impulses in check and avoid jumping at a hot stock tip, or rebalancing your portfolio to make a bet on an asset you don’t fully understand. Take the time to assess your risk tolerance and construct a plan to avoid letting FOMO dictate your investment strategy. It’s okay to have risk exposure in your portfolio – the question is, how much are you able to risk for the potential of large gains?
To mitigate the effects of FOMO on your retirement portfolio, make sure your portfolio is properly diversified based on your risk tolerance. Portfolio diversity can be a key to achieving a balance between growth and safety.
How Does Portfolio Diversity Work?
Essentially, portfolio diversity refers to a balance between high-risk and low-risk assets across sectors and asset classes. For example, a retiree may allocate a portion of their portfolio assets to high-growth technology stocks, while another portion of their portfolio is allocated to consumer staples stocks that pay dividends. You may also want to diversify across asset classes such as real estate, natural resources, non-traditional bonds, and other non-correlated asset classes. You also don’t have to choose one or the other, which makes it a good way to address FOMO, given that you can still allocate a portion of your portfolio to risk-tolerant assets.
There are plenty of ways to address FOMO, and we encourage you to talk about how to avoid it with a financial professional. At Brogan Financial, we focus on working with you to understand your unique financial situation and goals, and turn that into an actionable strategy that can help you achieve the retirement you want. Talk to us today for a complimentary review to get started.