We have all experienced the fear of missing out at one point in our lives. It is the feeling you get when there is an event taking place that you cannot attend. It is the “But, what if?” when considering whether to turn down an opportunity. It is the anxiety that is all too common when we want to agree to something but are over-committed.
In an age of social media and 24 hour news cycles, where there is a missed opportunity or the promise of ‘the next big thing’ right under our noses, it is impossible to avoid a fear of missing out without becoming a hermit.
There is no shame in experiencing a fear of missing out, it is how you act on that feeling that makes all the difference. How often do we step out of our slow-moving supermarket queue to join what seems to be the fast-track only for it to grind to a halt as we watch our old queue fly past us? The same is often true when we switch lanes in the motorway. Getting your shopping home a few minutes later is hardly the end of the world, but when we apply the same principles to investing, the results can be much more severe.
Chasing a star performing fund is always going to be a risk. Trying to perfectly time your moves in and out of markets is extremely difficult, and even the greatest investors out there get it wrong more often than they get it right. The temptation that comes from the fear of missing out is to make knee-jerk reactions and focus on the volatility of the markets, looking at the daily ups and downs. This can lead to irrational decisions. Your returns are not going to be a perfectly straight line from the bottom left to the top right of a graph, but that does not mean you should jump ship and change lane at every inevitable up and down along the way. Patience is key to a sound investment philosophy and although it can be very tempting to try the quick-fix, if it sounds too good to be true, it usually is.
One way to counter any fear of missing out concerns is to have a properly diversified portfolio spread across different funds. In the words of Harry Markowitz, pioneer economist, “diversification is the only free lunch in finance”, so do not put all your eggs in one basket.
27 February 2019
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