By Tim Nielsen, CFP® – Advisor
In this short blog post, I am going to talk about why it is so important to remind yourself to remove that little voice over your shoulder. The one telling you to time the market or to listen to the so-called investor genius on social media.
We have all been there. Playing a round of golf or enjoying happy hour amongst friends when one decides to let everyone know about the “hot” stock they picked up last week and doubled overnight. They go on to mention that the stock was discovered in a chat room or forum from a self-proclaimed investor guru. By the time you heard about the stock, the whole World made money and got out at the right time.
FOMO, or Fear of Missing Out, plays a large part in everyone’s lives. They feel that they always miss out and people become rich by timing the market. What they don’t know is all the previous stock losers that the friend incurred before that hot stock paid off. So why is it so important to ignore that little voice over your shoulder?
In today’s technologically advanced world, information moves so quickly, and the markets respond just as fast, that by the time that “hot” stock or tip has reached your ears, the market has already reacted. How many times have you invested in something, because of an article you read, only to have to sell lower because you ended up buying at the stock’s high? That is why having a well-thought-out Financial Plan is so important to achieving the long-term growth you desire. Think of it this way. If you invested $10,000 into the S&P Index back in 1993 and did nothing till the end of 2022, that $10,000 would be worth $158,434. But if you missed the 10 best days, by trying to time the market, that $10,000 would only be worth $72,584. (54% Less)!
Want a suggestion for satisfying that itch to “time” the market? Consider designating 5% of your Investable Assets as a play fund. You can use those funds to invest in companies that you love, use every day, or heard from a friend. With this account, you can put away the need to look at the other 95% of your assets and trust that a well-diversified portfolio will achieve the long-term growth you need to be financially free for when you retire.
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