Avoiding FOMO when it comes to your portfolio

The great investor, Peter Lynch, is credited with saying, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”  Since 1982 our firm’s philosophy has been to not try and time the market, as we know it is a loser’s game.  What is important to become a successful long-term investor is time in the market, not timing the market.  We believe a diversified, well-balanced portfolio created to match each client’s risk and investment return objectives is the best way to help investors reach their long-term goals.  A dear colleague of ours once said our job is to help clients avoid the trap of buying high, selling low and repeating until broke.  Unfortunately, many investors seem to be doing that right now.

Why is it so easy for investors to buy high and then sell low?  We believe it comes down to psychology.  Many people scour the stores and internet for sales and won’t buy new clothes or a new car until they get an amazing deal.  These same people like to buy stocks after they have had a good run.  Part of this, we suspect, is FOMO or the Fear of Missing Out.  Once investors start to hear how much their neighbors, in-law’s and friends are making in the market they want in! 

There are many investors who have been on the sidelines for the past few years and we believe the higher the market goes the better the odds this money will be invested into stocks, which could continue to drive prices higher over the short-term.  According to a September 24, 2019 article on businessinsider.com, a record $1.1 trillion dollars had shifted out of stocks over the previous year.  Earlier this year, Axios reported that the top 1% wealthiest US households held a record $303 billion in cash, which is up from $15 billion before the financial crisis! 

Creating and maintaining balanced and diversified portfolios may not be “exciting”, however, over the long run, we are more comfortable in this method of investing than constantly moving money in and out of the markets. 

Wishing everyone a safe, happy and healthy 2020.

The Bond&Devick Team