Nancy Graham May 24, 2018 Personal Wealth Are You Suffering From “Investment Envy”? This just in! A recent study found that investors around the globe have been exposed to a highly contagious and rapidly spreading disease! It’s called … investment envy. Early symptoms include headaches, upset stomach and loss of financial stamina. Left untreated, excessive and ill-timed trading may set in, along with elevated emotional distress. Alright, all kidding aside … When it comes to your investments, do you ever find yourself wondering something like, “Hey, what have they got that I don’t have?” You may be suffering from investment envy! Fortunately, I’ve got some great treatments to help with your recovery. Disappointing market returns aren’t necessarily the biggest threat to your wealth. Your own missteps can cause the worst damage, especially if you succumb to what I call “investment envy.” Investment envy is an extremely common condition, so don’t feel too bad if it happens to you. There’s a behavioral psychology term that applies to the condition as well. It’s called “FoMO,” or Fear of Missing Out. One study, describes FoMO as “the uneasy and sometimes all-consuming feeling that … your peers are doing, in the know about, or in possession of more or something better than you.” The same study also suggests, by the way, that social media is exasperating our FoMO tendencies to obsess over what other people are having or doing, instead of focusing on our own wants needs and happiness. So how does FoMO play out where your investments are concerned? It sets in when your friend, neighbor, family member or some talking head starts bragging about their most recent financial score. Maybe they made a million overnight buying up some bitcoin. Or they invested in a brother-in-law’s private venture which is now paying off handsomely. Maybe they’re soooo glad they got out of the market after “everyone said” it was time for a breather. Or they love the cannabis stocks they loaded up on when a friend of theirs got in the business. Or … You get my drift. Almost everybody has some success story they love to tell, about how they got wise with an investment. The typical implication is that you should get wise too. At least investment envy, or FoMO, leaves you wondering if you should. Next thing you know, you’re seriously questioning whether your own investments are good enough or fast enough for you. Other than maybe some emotional unease, there’s no lasting harm done if all you do is question your existing plans. The trouble begins if you act on your uncertainty for the wrong reasons. That is, if you abandon a well-planned and tightly structured investment portfolio and start chasing after other people’s outcomes. So before you succumb to investment envy, remember these points: First, odds are, your source is probably unwittingly exaggerating their overall financial success. As I mentioned above, almost everybody has a success story to tell. You probably have one or two of your own. Now be honest. When you relate that time you did well do you also tell your audience about that other time? You know the one I’m talking about: When your cousin’s hot stock tip about buying into his forest product firm came just before the bottom fell out of the timber industry? The point is, when you hear about other people’s financial “wins,” you’re probably NOT hearing about the many losses they’ve also had over the years. Will they really do better than you over the long haul? Time will tell. Here’s another thing to think about. Maybe there are no bad-news tales to tell. Maybe your friend or neighbor’s sister or whomever really has made a fortune putting money into this or that venture. But remember how investing – and life – really works: The more risks you take, the greater the possible rewards. But, as the familiar saying goes, the harder you may fall, too. In short, other people’s winning ventures may be fine for them. But they may be an awful idea for you. They may have come out ahead by taking on far more risk than would be appropriate for you and your financial goals. Their risky bid happened to pay off for them, but it could just as well have ruined them. By upping your risk exposures to compete with theirs, you’re playing their game instead of your own. You also may be playing the equivalent of Russian roulette with your money. The cure for investment envy, isn’t flashy or dramatic, but hopefully it’ll protect you against placing any rash trades the next time you’re feeling the itch. First, form a detailed investment plan that describes the level of market risks and expected returns you’d like to build into your strategy. Write it down. Maybe even sign it. Think of it as your pledge to yourself. Next, build your investment portfolio according to plan, employing sensible fund families that are most likely to help you stick to your plan efficiently and cost-effectively. Finally, over time, whenever you’re tempted by investment envy, FoMO, or any other emotional response to the market’s many moves, remember your pledge. Have your goals or circumstances changed? If so, then it may be appropriate to judiciously revisit your plans. Otherwise, your best course in an uncertain market is probably the one you’ve already established. Stick to plan! While you’re at it, you can always revisit today’s video for a booster shot of financial resolve. Better yet, keep the treatments going by following me on LinkedIn. That way, you shouldn’t ever have to fear missing out on any of my No Dumb Questions! Share: Facebook Twitter LinkedIn Email CIRO Advisor Report
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