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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…