FOMO. The fear of missing out. The compulsion to keep up with the Joneses can reach every corner of our lives: purchases, lifestyle, and even investing. Have you ever felt it? Social media has brought this phenomenon to the forefront in recent years, but most people haven’t given much thought to how Fear of Missing Out could be driving their investment behavior.
People like to think that they make their financial decisions based solely on logic …but that may not be the case.
Two researchers from Stanford say when it comes to investing, what we fear most is not the risk of losing our money, but the risk that we might not do as well as our peers. This could mean taking on more risk than is pertinent in the hopes of big pay offs, or leaving too much money on the proverbial table when market euphoria hits. All because we’re afraid of missing out on the next big opportunity.
This strange phenomenon explains why and how bubbles in the stock market appear. Investors pile into certain “hot” sectors or stocks, and prices inflate to unsustainable levels.
So why do investors follow the same patterns over and over again? Strangely enough, a herd mentality emerges that allows investors to feel a sense of false security – the idea that everyone is doing it, so it must be a good idea – and shared loss. When everyone loses money together, it’s not as painful as being the only one to lose (or the only one to “miss out”). The shared loss makes it easier to shrug off losing money, which sets investors up to repeat their previous mistakes.
There is good news though. You can avoid FOMO on great monetary gains while still managing risk appropriately. One way to accomplish this is by moving a portion of your portfolio to a fixed index annuity.
A Fixed Index Annuity offers the potential to grow your money along with stock market indexes, and comes with a guarantee that your money is 100% protected from stock market losses.
If you’re looking for a way to secure savings for your retirement, you may want to consider re-allocating some your assets from risky positions to a fixed index annuity.
Are you in need of a financial FOMO intervention? Contact Dewitt & Dunn today to schedule a complimentary appointment with one of our experts.
If you are cringing every time you open your bills every single month, well, you’re definitely not alone. According to a new report from the Federal Reserve Bank of New York, Americans’ debt level has hit a new record high. Total U.S. household debt has hit nearly $13 trillion in the most recent quarter. That is up over $500 billion over the same time last year. Well, that study also found that the average American is about $37,000 in debt. So 1 in 10 Americans are more than $100,000 in debt, and that’s not even including your mortgage. Credit card debt is also at a record high. According to the Federal Reserve, U.S. households collectedly have more than $1 trillion in credit card debt. Read More
On Wednesday the Federal Reserve increased its key interest rate by 0.25%, marking the first interest rate increase since June of 2006. According to financial professional Cathy DeWitt Dunn, the Fed is likely to increase rates even further in the coming year. Read More
September is Life Insurance Awareness Month, so now is a great time to determine if you need life insurance, how much you need, and what type of life insurance you need. Fox News Good Day Sunday interviews financial professional, Cathy DeWitt Dunn to discuss life insurance and how it has evolved into what it is today. Read More