FOMO Will Destroy Your Finances

[Intelligent Income Daily]( FOMO Will Destroy Your Finances Brad’s Note: With any kind of investing, there’s a danger of losing your money. And there’s no better way I know of to lose your money than by giving in to greed. I get it. When we see flashy stocks skyrocket or high-risk bets pay off, it’s hard not to fantasize about achieving the same results. But the ugly reality we don’t realize in that moment is that kind of success usually doesn’t last… And the end result is much less enviable. Today, my colleague Jeff Clark reminds us how greed can lead to some very poor financial decisions. Jeff is a master trader with decades of stock market experience. He shares a valuable lesson on how FOMO (fear of missing out) increases your risk and doesn’t pay off. Remember this cautionary tale, and avoid making these mistakes in your own portfolio if you want to secure long-term wealth. --------------------------------------------------------------- By Jeff Clark, Editor, Market Minute [Jeff Clark] In 1999, two of my favorite clients fired me as their financial advisor. It was a young husband and wife. I handled the husband’s father’s money for more than a decade. The father passed away a few years before, and the couple inherited the estate. It was a LARGE sum of money – large enough that if we earned 10% per year on the assets, this couple could’ve lived off the earnings and never work again. In 1999, the various conservative mutual funds I recommended they invest in earned 58%. It was far more than we had projected. It was far more than they needed to maintain their standard of living. But the Munder NetNet Fund their neighbor invested in – which only bought internet-related stocks – earned three times that amount. The couple told me they wanted to sell the funds I recommended and put everything into the Munder NetNet Fund. I reminded them of their long-term goals. I told them that 1999 was an “outlier” year. Just about everything made money. They had made far more money in their conservative funds than we had projected. It wasn’t likely to happen again anytime soon. And even though I would have profited handsomely on the commission earned by selling their existing funds and buying the Munder NetNet Fund, I told them not to do it. In fact, I refused to do it. So, they fired me. They took their money to another broker who did exactly what they wanted to do… Over the next three years, the conservative funds gained an average of 9% per year. The Munder NetNet Fund lost an average of 27% per year. The couple’s money evaporated. Their financial security disappeared. Had they simply stuck with the plan we had set up to make 10% per year over time, they would’ve been just fine. They never would’ve had to work again. They’d never have any financial concerns. They could’ve raised their family with all the benefits that financial independence provides. But that wasn’t good enough. Their neighbor had made more and that wasn’t acceptable. So, they threw away the strategy that worked best for them… and rolled the dice on a more aggressive posture. That’s the danger of FOMO (fear of missing out). Don’t Give in to FOMO Whenever there’s a hot trade in the market, whenever an asset class captures the headlines for producing HUGE gains, the automatic response for most investors is, “Damn! I have to jump on board.” To them, valuations don’t matter. Logic doesn’t matter. All the time-tested market-based fundamentals don’t matter. All that matters is… “This asset is moving higher. My friends and neighbors are making more money than me. So, I have to get on board.” It’s a classic FOMO event. Folks, I must tell you… FOMO will destroy you. If your neighbors are making money, then good for them. If Biff and Muffy at the holiday cocktail party are bragging about their HUGE profits in cryptocurrencies, then good for them. That’s wonderful. You should be glad that your friends, neighbors, and in-laws are doing well. Prosperity is a good thing. But when logic doesn’t support the trade – or when your own financial objectives require a more conservative stance – then chasing the trade is a mistake. You should focus your investing and trading strategies on what is right for you. That means you’ll underperform your neighbors in some years. But who cares? As long as you meet the performance necessary to achieve your long-term goals, then it’s a win. Focus on Your Long-term Goals I’m a trader. My immediate objectives are to make profits on short-term trades. But my recommendations fall within the constraints of a longer-term objective. And in the longer-term, it’s the contrarian – or less popular – trades that will generate the largest gains. Logic and reason always win out over emotion. Chasing performance… chasing the hot idea… is almost always a bad idea. Traders who rush to get into trades simply because it’s the hot idea of the moment, or because their neighbors are profiting, are making a mistake. If the trade doesn’t have a fundamental backing… if it doesn’t fit with your overall longer-term strategy… then it’s not likely to turn out well. So, when it’s time to sit on the sidelines, I don’t mind telling folks to do so until a better opportunity arises. We don’t need to chase any trades just to keep pace with the neighbors. FOMO will argue otherwise. But I have more faith in the profitability of an anti-FOMO trade. Best regards and good trading, [Signature] Jeff Clark [Wide Moat Research]( Wide Moat Research 55 NE 5th Avenue, Delray Beach, FL 33483 [www.widemoatresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Wide Moat Research welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-415-6046, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@widemoatresearch.com). © 2024 Wide Moat Research. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Wide Moat Research. [Privacy Policy]( | [Terms of Use](