Let’s be honest, when it comes to money and investing, that little voice in the back of your head can get pretty loud. It mutters things like, “What if the market crashes right after I invest?” or “What if I choose the wrong date to start receiving Social Security.” We’ve all been there, staring at our options, feeling a bit like a deer in headlights. You could call it “fear of making a big mistake,” or FOMBM for short. It’s that nagging feeling that a single wrong move could derail your hard work of building wealth and ruin your future.
While not as trendy as FOMO (fear of missing out), the fear of making a big mistake (FOMBM) is a very real feeling that can hinder your ability to create and stick to a sound financial plan. Here’s the thing: letting your fear call all the shots may truly be the biggest mistake of all. Think about it. If you’re constantly waiting for the “perfect” moment or the “sure thing,” you might end up missing out on some really solid opportunities along the way. The only reason the stock market rings a bell is to announce the beginning and end of each trading session, not to announce compelling opportunities.
Since no bell signals compelling opportunities, the key for you may be to make a good decision and then be prepared to adapt and refine as needed, rather than waiting for a perfect one that may never materialize.
Imagine your yard at home. You’d like to plant trees and bushes to make it look more established and to get curb appeal. But if you begin to worry about planting the “perfect” tree, or that this might not be the “best” year for starting, you will never plant anything, and your yard will stay empty. If instead, you dismiss FOMBM and go ahead with your plan, even though some of the foliage might not grow exactly as you hoped, others may flourish and bring you the landscape you wanted.
Investing can be a lot like that. There will be ups and downs, some investments and decisions will perform better than others but staying on the sidelines with FOMBM means you will miss out on the potential for growth.
Now, we’re not saying to throw caution to the wind and make wild guesses. Smart financial decision making is all about being informed, doing your homework, and having a well-thought-out plan. Think of us (your financial advisors), along with your estate planner and tax professional, as your experienced landscaping guides. We can help you make choices based on your tolerance for volatility (how comfortable you are with potential ups and downs in the market) and financial situation and offer advice on how to nurture your wealth over time.
We can’t predict the climate (fluctuations in the markets, economy, tax law, etc.), but we can help you build a resilient landscape that should weather different seasons.
So, how do you start to quiet that FOMBM monster?
- Remember your “why”: Why are you investing? What’s the purpose of your portfolio? We work together to build a plan based on your goals, your timeline, and your comfort with market volatility. This plan is your roadmap. When FOMBM whispers doubts, revisiting your plan can provide clarity and reassurance that your strategy is designed for the long haul, not just for dodging every potential short-term pitfall.
- Use time as your ally: Compounding is when you earn returns on the money you’ve invested and on the returns you’ve earned along the way. Warren Buffett, the noted investor, famously compared it to a snowball rolling down a long hill, which picks up even more snow as it gains momentum. Albert Einstein supposedly said, “Compound interest is the eighth wonder of the world.” Simply put, implementing good investment and financial decisions can have a positive and growing impact on your financial well-being. The earlier you start, the better.
- Stay informed without getting overwhelmed: Understanding what you’re invested in and why you own it can be a powerful antidote to fear. That’s a very important part of our job – to help you understand your portfolio and the rationale behind our strategies. Don’t hesitate to ask questions! We’re here to provide you with the information you need to make confident decisions, without burying you in jargon.
- Accept Imperfection: No one has a crystal ball. Many financial decisions will not be a “home run,” and that’s okay. The goal is to make thoughtful, informed choices that align with your plan and to learn and adjust as needed. A diversified, well-planned strategy is designed with the understanding that there will be imperfect outcomes along the way.
Ultimately, the goal isn’t to avoid all mistakes – that’s pretty much impossible in any area of life. The goal is to keep moving forward. By understanding your tolerance to volatility, having a solid plan, and collaborating with your advisors, you can approach financial decisions with confidence, knowing that you’re taking thoughtful steps towards your financial future without letting the fear of a misstep hold you back.
Let’s keep the conversation going. If you have questions about your investment portfolio or about upcoming financial decisions, please call us at (402) 991-3388. We want to hear from you.
Important Note for You: Please remember that investment advice and financial strategies involve risk, and there is no guarantee that your financial goals will be achieved. The information provided in this article is for general guidance only and does not constitute personalized financial advice. It is essential to consult with your financial advisor, a tax consultant and estate attorney to discuss your specific circumstances.
Eric Ball, CFA
Managing Director & Chief Investment Officer
America First Investment Advisors, LLC
Omaha, Nebraska
This post expresses the views of the author as of the date of publication. America First Investment Advisors has no obligation to update the information in it. Be aware that past performance is no indication of future performance, and that wherever there is the potential for profit there is also the possibility of loss.
