Have you ever stood outside a ride at a theme park debating whether the line is worth it? I had this thought a few times while at a water resort with my family over Memorial Day weekend. While you’re deciding, dozens of people get in line. An hour later, some of them are getting off the ride while you’re still standing where you started. That’s how many investors feel today. They’ve been waiting for the “right” opportunity to get on this recent market ride.
In recent years, investors have had many reasons to be cautious. Inflation surged. Interest rates climbed at the fastest pace in decades. Regional banks failed. Geopolitical tensions escalated. Recession forecasts seemed constant. Investors assessed all the reasons NOT to get on the ride. Despite these reasons to stay on the sidelines, stocks continue to rise.
The S&P 500 recently posted its longest winning streak in more than a year, closing at new record highs as investors continue pouring money into equities. Much of the momentum has been fueled by enthusiasm surrounding AI and a handful of large technology companies that continue to dominate market returns. For investors who have remained heavily in cash waiting for the “right time” to invest, this creates a different kind of risk: Fear of Missing Out.
FOMO Isn’t Just Emotional, It’s Financial
Most investors think of risk as the potential to lose money. But there is another form of risk that receives far less attention: failing to participate in growth. Every major bull market leaves behind a group of investors who spent months, or even years, waiting for a correction that never arrived. They convince themselves they are being disciplined, but eventually they find themselves watching from the sidelines as markets keep climbing.
The challenge is that markets rarely feel comfortable at new highs. There is almost always a reason to be concerned. Economic, political, interest rate, and global conflict uncertainties. The headlines change, but uncertainty remains constant. If investors wait for complete clarity before investing, they often miss the strongest portion of the recovery.
The Rally Isn’t as Broad as It Appears
At the same time, today’s market offers an important reminder that enthusiasm can become excessive. While the S&P 500 continues setting records, market participation has narrowed considerably. Recent market data shows that a relatively small group of large-cap technology and AI-related companies are responsible for much of the index’s advance. In fact, analysts have noted a rare “breadth paradox” in which the index continued to rise even as more stocks declined than advanced.
This doesn’t necessarily mean a correction is imminent. It does, however, mean investors should be careful about chasing performance simply because everyone else is making money. FOMO can cause investors to abandon their plan, increase risk beyond their comfort level, or invest heavily in whatever asset has recently produced the strongest returns. History shows that those decisions rarely end well.
The Real Solution: Participation Without Speculation
Successful investing isn’t about avoiding every downturn. Nor is it about chasing every rally. The goal is to maintain a disciplined strategy that allows you to participate in long-term growth while managing risk appropriately for your situation. That means having a portfolio aligned with your goals, time horizon, income needs, and risk tolerance (not one aligned with the latest market headline).
Today’s market is a reminder that sitting in cash indefinitely can be costly, but that chasing returns can be equally dangerous. The best investors don’t let fear drive their decisions. They also don’t allow FOMO to drive them either. The investors who tend to benefit most are NOT the ones who perfectly predict the next correction or the next bull market (I haven’t found anyone who can). They’re the ones who stay committed to a thoughtful plan through both.
Caution still has its place. However, investors should be careful that caution doesn’t become paralysis. Because while the risks of investing are often visible, the risks of staying on the sidelines can be just as costly. And sometimes, the biggest investment mistake isn’t getting on the ride at the wrong time; it’s never getting on at all.
Have a blessed week!
Joe Shearrer
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly.
All investing involves risk, including loss of principal. No strategy assures success or protects against loss. Any economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.
Sources: