FOMO is the fear of missing out. A common error that investors make is trying to time the markets. It stinks to miss the best days. An investor’s average yearly return over the past 20 years would have been 5.33% lower if they had missed the 10 best days of the stock market. They would have missed out on almost half of the market’s gains because of this! The typical investor loses 3% annually to the market. One explanation for this is the common practise of investors to buy at market peaks and sell at troughs. Because of this, they frequently lose out on the finest trading days.
Investors can take the following measures to ensure they don’t lose out on the market’s most profitable periods:
- Don’t sell out now; think long-term. Although the stock market is very unpredictable in the near term, it has shown a consistent increasing trend over the long run. Investors who stay invested for the long term are more likely to capture the market’s rewards.
- Regularly rebalance your investments. To rebalance, you must sell some of your winning positions and increase your holdings in your losing ones. This helps you maintain your portfolio in accordance with your investing goals and level of comfort with risk.
- To save money, use euro-cost averaging. Euro-cost averaging is a method of investing whereby a set amount of money is invested on a regular basis, irrespective of fluctuations in market price. This helps to lessen the risk of purchasing high and selling cheap. If you’re nervous about investing a large chunk of money during volatile times, this can be a smart alternative, as automated monthly investments are made on your behalf.
It’s also vital to keep in mind that perfect market timing is practically unachievable. Even the most skilled traders and fund managers cannot anticipate when the market will rise or fall. That’s why spreading your investments out over time and keeping a diverse portfolio are crucial.
If you want to be sure you don’t miss out on the finest days of the stock market, consider these additional pointers.
- You shouldn’t sell in a hurry. Maintain composure and hold off on making any hasty choices when the market is turbulent. Panic selling might lead to selling your investments at a loss.
- Make a strategy. Having a strategy in place is crucial before making any financial commitments. Your investing objectives, level of risk-taking, and expected time horizon should all be part of this plan. Having a strategy in place can help you maintain self-control and keep your emotions in check.
- The market cannot be timed successfully. It has already been established that perfect market timing is unattainable. Focus on long-term investing and portfolio diversification rather than trying to time the market.