How to Avoid FOMO!

FOMO is the fear of missing out. One of the biggest mistakes that consumer based investors make is trying to time the markets. Missing the best days hurts…

A study by JP Morgan found that if an investor missed the 10 best days of the stock market over the past 20 years, their average annual return would have been 5.33%, instead of 9.52%. This means that they would have missed out on nearly half of the market’s gains!!

Another study by Dalbar found that the average investor underperforms the stock market by 3% per year. One of the reasons for this is that investors tend to buy when the market is high and sell when the market is low. This means that they often miss out on the best days of the market.

There are a few things that investors can do to avoid missing the best days of the market:

• Stay invested for the long term. The stock market is volatile in the short term, but it has historically trended upwards over the long term. Investors who stay invested for the long term are more likely to capture the market’s gains.
• Rebalance your portfolio regularly. Rebalancing involves selling some of your winners and buying more of your losers. This helps to keep your portfolio aligned with your investment goals and risk tolerance.
• Use a pound-cost averaging strategy. Pound-cost averaging involves investing a fixed amount of money on a regular basis, regardless of the market price. This helps to reduce your risk of buying high and selling low. This includes monthly automated investments and can he a good option if you are worried about investing a lump sum during periods of volatility.

It is also important to remember that it is nearly impossible to time the market perfectly. The best investors/fund managers cannot predict when the market will go up or down. That is why it is important to stay invested for the long term and have a diversified portfolio.

Here are some additional tips for avoiding missing the best days of the stock market:

• Don’t panic sell. When the market is volatile, it is important to stay calm and avoid making rash decisions. Panic selling can lead to selling your investments at a loss.
• Have a plan. Before you invest, it is important to have a plan in place. This plan should include your investment goals, risk tolerance, and time horizon. Having a plan will help you to stay disciplined and avoid making emotional decisions.
• Don’t try to time the market. As mentioned above, it is impossible to time the market perfectly. Instead of trying to time the market, focus on investing for the long term and building a diversified portfolio.

Please be advised that this article does not constitue financial advice and as always if you need any help or independent financial advice please contact us at service@claritywealth.co.uk