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 informed 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 around 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 help work towards 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 to 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 or bonds. The more you diversify, the more risk mitigated you become against a downturn in the market or in one sector. 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 it’s encouraged to talk about how to avoid it with a financial professional. 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.
The commentary on this blog reflects the personal opinions, viewpoints, and analyses of BML Wealth Management’s employees providing such comments and should not be regarded as a description of advisory services provided by West Wealth Group, LLC. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.
Investment advisory services through West Wealth Group, LLC, an SEC Registered Investment Adviser. BML Wealth Management and West Wealth Group, LLC are affiliated entities. Insurance Services are offered through BML Wealth & Insurance Services, California Insurance License #0M15550.
We do not provide tax or legal advice, all individuals are encouraged to seek guidance from qualified professionals regarding their personal situation. Any references to protection benefits or steady and reliable income streams in this guide refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products.
