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I have an exasperating and ever-increasing case of double FOMOitis. Today’s stretched stock market valuations have given me a case of fear of missing out (FOMO) for not selling and locking in assured gains – sensible rebalancing theory suggests that we should all be selling on the way up. On the other hand, I have FOMO even considering selling because of the potential opportunity cost of not capturing further gains in a market with clear upward momentum – sensible investing theory (and Jonathan recently) suggests that we should ride the winners while they are hot.
In reality, many of HumbleDollar’s financial debates mainly matter on the margin – Social Security claiming, taxes, tariffs, interest rates, Medicare premiums, Roth conversions, annuities, diversification, dividends, specific fund selections, etc. We seniors have experienced the most amazing 15 years of stock market appreciation ever, and having a healthy asset allocation to stocks has been hugely beneficial. At this point, only a Japan-like decades of market pull-back could devastate the comfortable financial position of those (like most HD readers) with invested assets – FOMO for not selling. Yet, the economy, earnings, technology development, consumer spending, employment, GDP, and stock valuations all continue to grow nicely, and it is always best to stay invested for the long-term – FOMO to sell.
Anyone else likewise suffering a case of double FOMOitis?
John, it sounds like you may not have international stock exposure. If so, you may want to have an allocation. A few episodes of the Rational Reminder podcast with Prof. Scott Cederburg have detailed studies done that indicate international stocks are better at managing risk than nominal bonds and therefore recommend a 100% stock allocation even in retirement. Personally I would think TIPS would be good to include.
One of the interesting points in the studies was that currency fluctuations provide a good diversification benefit. It certainly seems to be working now.
A year ago the S&P 500 was 5555. Today it is 6325. On April 7 it was 5062. Those who sold in April locked in losses. Sometimes we are too smart for our own good.
On July 22 the WSJ published an article “Why Are Stocks Up? Nobody Knows”. The article included this tidbit “ Goldman Sachs strategist David Kostin’s journey shows how quickly Wall Street has pivoted. He began 2025 with a year-end target of 6500 for the benchmark and then cut it to 6200 after stocks began slumping. That got slashed to 5700 in late March on rising recession risk. Since then, Kostin has lifted his target twice, to 6100 and, earlier this month, 6600.”
It would seem these experts revel in providing short term opinions. Then there is the fear factor. I’m not fond of whiplash investing.
The conventional wisdom is anyone who has a decade or more before taking withdrawals is best to let their portfolios ride. As we approach retirement and withdrawals, then shift our allocation to 3-5 years of cash, or cash equivalents.
I followed the conventional approach. However, I’ll admit that in 2007 I had grave concerns because of what I felt would be a housing/banking crisis. Nevertheless, I didn’t bail but I did alter my allocation to reduce banking stocks, and that includes in the S&P. Since the bottom in 2009 the S&P has risen 765%. That’s over a span of 16 years.
There is a problem using numbers like these because greed can set in with the thought “If only I had sold in 2006 and then purchased at the bottom. “ I did decide to delay purchases and let the market settle and the fear to abate. I then dollar cost averaged in, which is a prudent way to invest.
Some attempt to play “catch-up” and pursue growth, but that too can be risky. In general I won’t buy any ETF or stock unless I am willing to keep it for a minimum 5 years.
My greatest losses were during the Dot-Com bust. The S&P fell about 37%, but I lost more because of the “growth” stocks I owned. Some became worthless. My greatest losses were during the Dot-Com bust. The S&P fell about 37%, but I lost more because of the “growth” stocks I owned. Some became worthless. How ugly was it? In 2001 my Net Worth was $5,315. No home mortgage, etc. Ouch!
I think I would feel it, John, but instead I feel like I’m getting back to normal. I was 100% invested in stocks, then heavy stocks, until a few years ago. I thought I was close to cutting back–or cutting out–work hours and would need to pull money from savings. Therefore, I moved several years’ expenses into bonds. This made my bond allocation feel high.
It felt even higher the next year, in 2022, when stocks dropped and I didn’t buy because I still had FONI (Fear Of Needing Income). As it turned out, I continued working and buying stocks, and stocks continued growing. So, now the bond percentage of my portfolio is getting closer to where I feel it should be. And I’m reflecting on the lessons I’ve learned, like the importance of paying close attention to all of Jonathan’s advice. Which makes me think of the article you alluded to…
Ed, I just posted a comment but too bad I didn’t first read yours with the coining of FONI. Our situation is similar what you described, but a potential larger chunk of change rather than steady income / base level withdrawal which is already fine. I’ll call it Fear of Needing Cash.
My FONI turned out to be phony. I love emotion, except when I hate it.😁
Hey Ed,
I am a big believer in the bucket strategy.
That being said, does your plan include 1-3 years of cash/earnings from your part time work in addition to your equities and bonds? Do you have a balance in bonds to get you through up to a total of 10 years in combined cash and bonds? Are your bonds short term, and do you have some in TIPS? (My bonds are 50/50 short term/ short term TIPS).
These are components of Morningstar’s Christine Benz’s recommendations (she includes a small amount of a dividend appreciation fund/ETF as well).
Her reasoning is you should have 1-3 years of cash for short term needs. Short term bonds (to limit interest sensitivity) and TIPS (to minimize the effects of inflation) for up to 10 years. The balance of your portfolio is then in equities. This plan protects your equities from being tapped in a long term market downturn. Rarely does a market down last greater than 10 years.
David, we’ve got about eight years of expenses in “bonds”, that includes about a year of cash. The rest is mostly short-term bond funds. But I’m currently covering expenses with part-time pay, and my wife may claim her Social Security early, before I claim in seven years at age 70. Thanks for checking my plan health!
I know the feeling. Our portfolio is at an all time high. One part of my brain says “be sensible. The market has been too high for too long” It wants me to “capture” this gain to prevent a large portion from a market crash. Then the logical side reminds me I locked in 10 years of base level withdrawals a few months ago. Still, the two sides battle for control using both fear and FOMO.
My philosophy is to stick with your allocation. Be happy to bank your gains. Don’t be greedy.
Not retired yet, so a slightly different situation. We are just in low cost index funds, and then we forget about it.
I wouldn’t say I have a fear of a market drop, but I’m a bit torn between feeling we should have a higher allocation to low risk assets (bonds and cash) for potential near term use, and a bit of a fear of selling small caps low. Because we have a small cap tilt and because of where assets are held, getting to a higher bond allocation is going to mean reducing our U.S. small cap holdings. I’d rather reduce stocks across the broad market, but I can reduce small caps within tax-sheltered accounts.
(Setting aside any debate about whether bonds are low risk.)
Michael – agreed as you highlight the whole challenge of “risk” determination. I’ve come to believe the most important variable to achieve retirement financial security is probably “asset allocation” to stocks which we don’t discuss enough on HD. Over the long term stocks rise, so maybe we are all over-thinking the real underlying risk of pushing our stock allocations to the highest level we each can possibly tolerate.
Even my conflicted FOMO is likely a senseless worry, because we can realistically tolerate a pull-back, and markets eventually recover. I believe my FOMO is more a result of the recent increases in the rate of change (steep-ness or derivative) of stock valuations rather than the general direction – price to earnings multiple expansion is extremely unlikely to continue at the current pace. My sense is stocks are more risky now than they were twenty or thirty percent ago, but perhaps that’s just not the case. Anyway, I’m sure I’ll stay conflicted and invested.
I agree John, your FOMO as you describe it is probably serious nothing to worry about for the reasons you describe.
Mine is probably worth a bit of worry as it’s combined with the potential
desire to spend money in the near fortune, on property for example. A big drop next week will recover eventually, but meanwhile if we want to spend money, that timing would be unfortunate.
I will also stay conflicted and invested. However with the above in mind I did make an adjustment after posting yesterday, moving some of the portfolio from the stock to bond column. Probably more to follow, despite the headlines about bonds lately.
I rebalance yearly if my allocation has drifted 3% or more. No FOMO involved.
We sort of partially rebalanced…Our daughter got engaged a few months ago. Last week, after my wife and I had eventually decided how much we were going to contribute to the future wedding, we locked in some gains to cover the cost…. technically the wedding contribution isn’t costing us anything, well that’s what I’m telling myself 😂
What about the wedding dress?
Ah…. but I still owned my business then, no need to touch the portfolio 😉
We stick to our plan and rebalance based on drift thresholds. No plans to change.
Ditto. I don’t get greedy. Every quarter I calculate out investment and total net worth. When we are 5% off of our allocation, especially if the market is high, I rebalance from equities to bonds. I figure then I am “banking” the profits.
My old man RIP used to tell us that in the stock market …
”There is room for Bears. There is room for Bulls.
There is NO room for pigs.”
Winston, I heard a similar version: “In the market the bears make money, the bulls make money, the pigs get slaughtered”.