Don’t succumb to the FOMO – it’s not worth it!

Stock markets are running high and going higher with each passing week. You have not yet got in at all or committed ‘enough’ money, and you’re feeling miserable with all those bragging in your Whatsapp or other social media groups about the huge gains made!!

You may not know it but you’re suffering from FOMO – the Fear of Missing Out.

Watching others make a lot of money in the stock market may make you feel obligated to join in and get in on the gains, even if the logical part of your brain is telling you that the biggest rewards have already been had. Additionally, knowing that friends and acquaintances have already had financial success with a certain investment can give you an unfounded sense of confidence about your investment choice, which could result in you ignoring advice from experts that you might normally take.

Please remember that, being disciplined is hardest at market tops and bottoms. Near the bottom, fear is all-consuming. Worries that the market will fall further, combined with seeing your portfolio plummet in value, make staying in or buying more stocks challenging. Remember March 2020?

But investing near market tops is challenging as well, as greed takes hold. You kick yourself for not having invested in some of the top mutual funds or stocks or sectors before they took off. You want to buy those hot investments to benefit from further gains but worry that you have missed the run-up.

It is human nature to regret missing out on a good thing. It’s difficult to hear of other investors making hundreds or even thousands of percent returns in short periods of time with investments you missed out on. This fear of missing out (or FOMO) can be overpowering. But resisting FOMO is vital to good investing behavior. It is completely aligned with Warren Buffett’s advice to “be greedy when others are fearful, and fearful when others are greedy.”

But you don’t need to do nothing. Instead of following the crowd, rebalance by taking gains from your high-flyers and adding to good mutual funds, value stocks, international stocks, and non-correlated assets that have been laggards.

Don’t try to time the market by cashing out, but don’t follow the crowd and pile into the investment trend of the day either. Adopt a long-term perspective and stick with your strategy of investing specifically for your financial goals. Great investors ignore the noise and stay focused on their long-term goals. This may not be as much fun as day-trading Nifty or bitcoins, but history teaches us you’ll be better off.

Which Mutual Fund NFOs (New Fund Offers) should you subscribe to?

Investors are foolish – that’s what mutual fund (MF) houses perceive investors to be! You see, they take advantage of market rallies and try to woo investors with NFOs that make little sense.

3 major reasons for avoiding NFOs:

  1. They don’t have any track record to rely on. Most of the times mutual funds sell old wine in new bottle; meaning they launch funds that are pretty similar to the ones that are already in the market and have an established track record.
  1. More often than not, NFOs are launched when market momentum is strong, valuations are high and there is good news all around. This limits the chance of fund managers getting good bargains while constructing portfolio. Basically such a strategy relies on euphoria netting good investor response than any intrinsic ‘goodness’ of the offering.
  1. NFOs are not like IPOs – people look at NFOs as they look at IPOs. They think they will get benefitted if the demand for fund increases, just like it happens in stocks. A MF works in a different manner. The price of a MF does not matter – whether you get it at a NAV of Rs 10 or Rs 2000 – what matters is the future percentage returns it will get you.

Investing in NFOs is like a shot in the dark. It will be wise to opt for an existing scheme that has a proven track record instead of going for something new or unpredictable.

Even if it is something unique and can be a good fit in your portfolio, wait for some time to see if the theme or investment strategy plays out as intended.

(Contributed by Lakshay Gupta, Associate Financial Planner, Team Prithvi at Hum Fauji Initiatives)


World Mental Health Day, 10th Oct: Promise yourself mental peace

Mental peace is the biggest asset that one can own. Your hard-earned money should first give you mental peace before fulfilling any material goal/objective.

Lack of money, poor utilization/management of money, anxiety from expected returns fluctuations, etc lead to mental stress resulting from poor money management.

Random investments through various investment platforms and unnecessary expenditures, both need to be controlled irrespective of your income level and owned assets. Similarly, creating unnecessary liabilities to get some tax advantage or to get some credit card points is a sure-shot recipe for a debt trap for an individual.

Lockdown during COVID 19 made everyone realize the importance of term/medical insurance as well as mental well -being – staying calm, cool, unperturbed ensured that the social isolation did not ‘rock the boats off’.

This mental health day we recommend you to gift yourself mental peace by taking proper holistic advice from a professional financial planner who can show you a roadmap to your financial cum mental well-being.

Remember – It is always better to approach a good financial planner in the initial stage itself rather than a doctor at a later stage. Because it’s all about mental peace…!!

(Contributed by Jatin Uppal, Deputy Manager at Hum Fauji Initiatives)

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