Every day we’re bombarded with reports of what’s hot
and what’s not – fueling a fear-of-missing-out (FOMO)
on some great investment opportunity. There is
even a new exchange traded fund with FOMO in its
name. But a diversified1 portfolio is still the best way
for you to maximize returns while minimizing risk.
The anxiety that we feel when we believe something
better is happening elsewhere isn’t unique to
investing. Fear of missing out is a phenomenon that
affects many aspects of our daily lives, and it’s far
more prevalent than you may think.
Indeed, FOMO was added to the Oxford English
Online Dictionary in 2013. The
emergence of social media has only compounded the
FOMO and investments don’t mix
How FOMO affects the way you think about your
investments is more worrisome. This summer, as we
start to gather again at neighborhood barbecues, you
are likely to hear some neighbor bragging how his
portfolio outperformed the S&P 500 Index so far in
2021. Almost immediately, you might be dissatisfied
with your portfolio and wonder why it wasn’t achieving
the same results.
You might get just as upset with your diversified
strategy when every media outlet is constantly
reminding you about the stellar performance of some
particular stock or sector. There’s a huge temptation
to change course and invest in the latest hot streak.
Fueling the urge is so-called recency bias, a belief
that recent financial trends will continue.
But changing your portfolio to take advantage of a run
that has already taken place is foolish. Think about it:
You would be selling assets that may be undervalued
relative to the market in order to buy assets that have
scored huge gains and are likely more expensive.
Don’t be fooled by FOMO
Moreover, history is littered with examples of hot
trends gone cold. In the late 1990s, many investors
wanted to abandon their diversified portfolios and buy
booming technology stocks. In the mid-2000s, it
seemed everyone wanted to borrow money to flip real
estate. A few years later, investors were worried
about a double-dip recession and wondered if they
should sell their stocks and buy gold instead. Now,
cryptocurrency is all the rage.
In each case, FOMO caused investors to be more
afraid of missing a bull market than suffering large
losses. In hindsight, changing your long-term
investment strategy would have been a drastic
When everyone from those in the media to your own
acquaintances tell you to place heavy bets on one or
more investment categories that have recently done
well, don’t be fooled by FOMO. You could lose big.
That’s why a diversified portfolio strategy is still the
best chance to achieve long-term investment
Your financial advisor
How does a wise investor avoid falling prey to
FOMO? That’s easy, just remember the adage: “If it
sounds too good to be true, then it probably is.”
To avoid losing large amounts of money due to your
FOMO, the best move is to diversify your holdings.
Diversifying your assets among various types of
investments and asset classes allows you to get a
better risk-adjusted return. You spread the risks
around. Over the long term, you will reap the benefits
of many investment sectors, rather than suffer
massive losses when a bubble bursts.
Your Synovus financial advisor is an expert on diversifying your
investments by helping you invest wisely in various
asset classes. We can help
you combat your FOMO.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Diversification does not ensure against loss.
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