Stop Wishing, Start Acting: Beat Market FOMO

[Music] Building a portfolio from scratch, it can be overwhelming, so start with the basics. Capacity for risk. In fact, some investors have never heard of this. You've got to pick the pace for getting back into the market. I believe that markets are overpriced right now. Dollar cost averaging would be my preference. There is no perfect day to invest. The key is just getting invested. Missing out on just a few days of market gains can significantly impact your long-term performance. You buy when everyone else is fearful. That's exactly what Warren Buffett taught investors years and years [Music] ago.

Hey everyone, welcome to another edition of We're Talking Money. If you're new here, I'm your host, Phil Clark, and today I think we need to talk about a pretty important subject, and that is when is it time to get off the sidelines and get back into the markets. A lot of you may have sold some investments over the last few years thinking that markets were getting a little too toppy. You raised a lot of cash. Maybe you've been accumulating cash in your IRA or brokerage account, and now you're stuck wondering, is it time to get back in? How do I do it?

There are a couple of steps that you need to know so that you have the best chance for getting back into the market and doing it the right way. So let's dive in to seven steps that are going to make you a better investor, and it's going to help you get off the sidelines.

Step one, the most basic thing is you've got to let go of the past. It's not unusual for people to think that they've missed every opportunity in the market, and you start wondering, will I ever get back into the market, and will my timing be right? Well, I'm here to tell you, you want to learn from the past, but don't live there. There's no way to go back and make up for that time.

Step two, you want to focus more on the future when it comes to thinking about your investment program. When you stay invested, the market tends to do very well over time. Staying invested over the long term has always provided far greater performance than staying in something like cash. A sound set of investments designed for your set of circumstances is going to give you an opportunity to really build well.

Step three, you've got to figure out the big picture, and that means stop trying to time and stop trying to invest for the short term. Investing is all about long-term performance. Building a portfolio from scratch, I'll admit, it can be overwhelming. However, if you break it down into incremental stages, the work gets a lot easier. You can see it more clearly.

So start with the basics. First, it's risk tolerance. How long can your investments stay invested, and how many dips, or how much of a dip, are you comfortable taking within your portfolio? I don't want you to get stuck on risk tolerance alone. There's more to it in that one thing that a lot of investors tend to forget: capacity for risk. In fact, some investors have never heard of this. If you have a stable income, for example, why would you invest too conservatively now, while you have earned income to take care of your normal lifestyle over the course of, say, the rest of your working career? That helps you prepare better for retirement because you can invest more aggressively. Always learn to balance risk and capacity when it comes to building your portfolio.

Step four, it's thinking through the investments from which you're going to be choosing, which ones are right for your portfolio. There's everything from mutual funds, ETFs, stocks, bonds, real estate, gold, limited partnerships. The list keeps going, but you've got to pick what makes sense for your risk tolerance and your risk capacity. Now, what you want to do is keep this simple. Trying to be a stock picker, that can be a fool's game unless you're really good at understanding the fundamentals and knowing how to read technicals. Otherwise, you might get disappointed. But that's where asset allocated funds or ETFs can come into play, and they do a great job of helping you be diversified and deliver great performance.

Now, step number five, you've got to pick the pace for getting back into the market. You really have two choices here. You can lump sum, so all of that money that you have sitting on the sidelines, push it into the market. When you do that, in theory, you get it in quicker and you have more time for that money to do its work. On the other hand, you could do it over periods of smaller lump sums, and some people refer to that as dollar cost averaging. That may not work as well as lump sum, but it also gives you a chance to get into the market slower, which might feel a little bit better depending on your circumstances. And if the market pulls back, you have an opportunity for those smaller tranches to buy more shares. And for the record, I believe that markets are overpriced right now, so if I were trying to get back into the market, dollar cost averaging would be my preference.

Here we are at step number six: don't get stuck on timing. There is no perfect day to invest. The key is just getting invested. Missing out on just a few days of market gains can significantly impact your long-term performance. Historically, investing during bad times has generally proven to be a really good strategy. That means buying when things are low or beaten down, when they're on sale, so to speak. That's exactly what Warren Buffett taught investors years and years ago: you buy when everyone else is fearful.

Step number seven, get help if you need it. Look, investing is not easy, and it can be nerve-wracking. If you're running into paralysis by analysis and you just can't pull the trigger, the right professional can help you design a plan that fits your needs, and that includes staying calm when times get pretty rocky.

With those seven steps, you should be ready to take the next one, and that is getting invested. It's a journey. You don't want to make rash decisions here. Be thoughtful. Do what you know is going to fit your set of circumstances, and don't forget, get help if you need it. And before you know it, you'll be fully invested back in the market, growing your wealth.

If you found this video helpful, I hope you'll give us a thumbs up, share the video, and don't forget to subscribe to our channel for more helpful tips on growing your wealth and making better financial decisions. I'll see you next time on We're Talking Money.