But This FOMO Goes to Eleven
Beware making financial decisions during emotional times
It seems almost cruel that so much is concentrated at the end of the calendar year. Most businesses’ fiscal years coincide with the calendar year end, so there’s often pressure at work to, “finish strong.” If you somehow avoid that particular pressure, don’t forget that you need to, “hit the ground running,” in the new year!
Then we layer on all the things that we thought we were going to do back in January, like lose that 10 lbs. & clean the back bedroom. Of course, somehow these things take on outsized importance, despite the fact that we know we’ll be eating a series of heavy meals & the house needs to be repeatedly tidied for guests (just throw it in the back bedroom).
On top of all that, we start reading year end articles about all the things we should have been doing since October, or getting emails from financial advisors (sorry) reminding us about year end planning. I’m not even going to get into the emotional stress that often goes hand in hand with the happiness that I hope we get from being with family over the holidays.
You might also be thinking that it’s funny I mention all of the above, given that we’re a year and a half into a pandemic that has been wreaking havoc on people’s health, both mental as well as physical.
In fact, I list everything above while knowing that we all have stress in our lives that no one knows about in addition to everything else, and the collective levels of stress we’re all experiencing has me worried. Why?
“Researchers have found that when people are put under stress—by being told to hold their hand in ice water for a few minutes, for example, or give a speech—they start paying more attention to positive information and discounting negative information. Stress seems to help people learn from positive feedback and impairs their learning from negative feedback.
This means when people under stress are making a difficult decision, they may pay more attention to the upsides of the alternatives they’re considering and less to the downsides. So someone who’s deciding whether to take a new job and is feeling stressed by the decision might weigh the increase in salary more heavily than the worse commute.”
Put a different way… When people are making investment decisions, they may weigh the potential returns more heavily than the risks.
My Twitter feed is full of comments, links to articles, blogs, etc., which make me want to wave my warms around shouting, “Danger Will Robinson!” Whether it’s crypto, real estate syndications, or the securitization of alternative asset classes like art, I mainly see two things: 1) clever folks who have figured out a way to separate people from their money, and 2) desperate, or overly stressed(?), folks who are worried about missing out on the next get rich quick scheme.
It also appears that every one of these new fangled investments is more complicated than the last. Take it from me, I spent the better part of my Wall Street career building, selling, and managing some of the most complex investments ever made. Every layer of complexity was carefully designed into the investments to make more money for the issuer or the bank, not for the investors. Two of the most important questions you can ask regarding anything financial are: 1) Who is making the money? & 2) Who is taking the risk? If the answers are not immediately clear, the safest bet is usually to walk away, not rush to make a decision for fear of missing out.
Even the end of year to do lists from advisors like me can cause undue stress. My whole job is to relieve financial stress, not add it, so I try very hard to prioritize things. Remember:
There are very few long term planning tasks that need to get done by certain dates, and rushing to complete them often causes more problems than it solves.
Why do I mention all of this? Because we all deserve some grace right around now. Some grace, some space, more patience, and the confidence to say, “no,” more often. There’s enough that we need to do regardless. Let’s not start confusing wants with needs. Don’t let someone else force their artificial deadlines onto your life, whether it be timing of retirement, investment returns, or how much holiday dessert you eat. Be with family & friends. You’ll be surprised when you wake up January 1 to see how much hasn’t changed.
