As I write this article, we are in the middle of flu season and during these late stages of a bull market, we are also in the middle of FOMO season.
FOMO stands for "Fear of Missing Out", a condition affecting investors that causes them to chase the hot stock or fund "before it's too late".
Recent business news is full of pieces on current trends such as marijuana and crypto currency.
FOMO is a unique condition which is not transmitted by touch, but by discussion. A common location for transmission is at the water cooler; where people will tell you they know someone who knows someone who hit it big on [inset hot trend here].
Fortunately, just as a flu shot can protect you against the flu, there are precautions you can take to protect yourself against FOMO.
Chief among these is having a comprehensive financial plan. A financial plan is built around your individual objectives and encompasses not only investment planning, but also budgeting, insurance, retirement, and estate planning.
If you are making financial decisions based on your unique plan, they will be the right decisions for you - though not necessarily for your water cooler companions. Unfortunately, a comprehensive financial plan does not make for the most exciting water cooler discussion.
From an investment planning perspective, one of the strongest preventative treatments against FOMO is having an "investment policy", the major component of which will be setting targets for the weightings of stocks, bonds, and cash within your portfolio.
These targets are not set and forgotten, rather they should be reviewed regularly and re-balanced when they move out of line. While this sounds straightforward, human nature often gets in the way - particularly in the current investment environment.
Suppose your portfolio has risen significantly in value due to growth in the equity fund components. Are you prepared to sell some of those funds to buy GICs or fixed income funds and bring your portfolio back into balance - even when those fixed income investments may have made less than 3 per cent over the past 12 months?
One of the best ways to put these precautions against FOMO in place is to work with a Financial Planner. Apart and aside from being able to put together a comprehensive financial plan included in which would be an investment strategy, a planner can help you avoid the pitfalls of human nature, working with you to manage the psychology of investing.
Ideally, from an investor's perspective, working with a planner brings a much more positive FOMO into play: keeping me "Focused On My Objectives"
Talk to your Scrivens advisor today and have focus brought into your plan.
Ottawa, ON K2P 0M3