Category: News

Does FOMO – the fear of missing out – affect your investment decisions? It can lead to you making investment decisions that aren’t right for you and potentially mean you take more risk than is appropriate.

At times, it can seem like everyone is investing in a particular company or sector. Perhaps you’ve seen a company feature on the news after share prices have skyrocketed. Or you’ve heard friends and family talking about how everyone is investing in a certain industry with the expectation that prices will rise quickly. If you’re not following these trends, it can seem like you’ll miss out on significant returns.

FOMO isn’t a new phenomenon, but it’s become easier than ever to share information. From social media posts to the investment segments of media, you can get an insight into how others are investing and it can shape how you view your own investments. It’s also easier than ever to act on these impulses. In the past, FOMO may have made you tempted to invest but it’s not something you could do straight away, providing you with some time to think. Now, you can transfer your money and invest in a matter of minutes.

If you’ve ever made an investment decision after hearing about a trend, FOMO could have influenced you. 

Why does it happen?

No one wants to be the investor that missed out on an incredible opportunity. How would you feel if colleagues invested in a start-up that delivered huge returns within a year, but you hadn’t followed the crowd? You’d no doubt be frustrated. Thinking about “what if” scenarios like this can encourage you to invest in companies that you may have otherwise avoided.

While investments decisions should be logical and based on fact, your emotions and experiences do have an impact. It means that financial bias can influence how you invest and feel about opportunities. In the case of FOMO, the “bandwagon effect” can have an impact.

We’ve all heard the phrase “jumping on the bandwagon” meaning that someone is supporting a cause only because it’s popular to do so. In investment terms, the meaning is similar – that investment decisions are made simply because others are doing the same. If you’ve invested based on “hot tips” or suggestions that stocks will soar alone, you may have experienced the bandwagon effect.

Following a trend can provide reassurance that you’re making the “right” decision. It’s a bias that can also lead to you deciding to sell an investment because others believe the value of these stocks will fall. FOMO can mean you make investment mistakes because the decisions are driven by worries, not by what is right for you.

How to avoid investing FOMO

1. Remember why you’re investing

You should invest with a goal in mind and tailor your portfolio to reflect this. Remember, your reason for investing may be very different from that of friends or people speaking in the media. What is right for one investor may not be right for you. Keeping your goal in mind can help you focus on why you’re making certain investment decisions.

2. Try to screen out the day-to-day noise

Often, investment trends are short-lived. While a company may be “hot” now, will it still be in a year? For the majority of investors, decisions should be made with a long-term outlook. Jumping from trend to trend can mean you’re exposed to more risk and that you miss out on long-term growth. While it can be difficult to do, try to screen out the day-to-day market news and instead focus on the bigger picture.

3. Keep investment risk in mind

Usually, investments with the potential to deliver high returns are also high risk. Don’t just focus on the potential gains but the risk that you could lose your money; would you still want to invest in a start-up that everyone is talking about if there’s a high level of risk? Always consider the risk of the investments you make. Overlooking risk could mean some of your investments don’t align with your risk profile and wider investment portfolio.

4. Be patient

Finally, investing isn’t a way to get rich quick. While stories of investors seeing their net worth soar may feature in the media, they are few and far between in real life. For most, investing is a marathon, not a sprint. Be patient with your investments and focus on your long-term goal.

It can be difficult to remove financial bias from the investment process. However, working with a financial planner means you have another view on your investments, helping you to highlight where FOMO may be driving your decisions. Working with us can help you build a balanced portfolio that reflects your circumstances. Please get in touch with us to discuss your investment portfolio.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

While the mantra might be “life begins at 40”, over 55s are planning to live their life to the fullest as Covid-19 restrictions lift. Retirement might be associated with taking it easy and putting your feet up, but over 55s are planning to explore new places and tick other items off their bucket list in the coming years. However, finances could hold some back.

With more free time and fewer commitments, retirees are finding they have an opportunity to pursue their dreams. According to a Royal London survey, 64% of over 55s are planning to travel more once the pandemic is over, and many others are hoping to tick off once in a lifetime experiences. The survey found the top bucket list items are:

• Seeing the Northern Lights (53%)
• Travelling on the Orient Express (42%)
• Visiting one of the seven wonders of the world (36%)
• Moving or purchasing a home abroad (25%)
• Going on safari (22%)
• Taking a hot air balloon ride (20%)
• Going to a major sporting event (20%)
• Driving a supercar (16%)
• Volunteering for charity (13%)
• Going to a festival (13%).

How do you want to spend your 50s and 60s?

Thinking about what you want to achieve in your 50s and beyond can set you on the right track for reaching your goals. Whether you want to travel more in the next few years or spend time on a hobby, creating a plan means you’re far more likely to be able to tick off your aspirations and live the lifestyle you want.

Setting out your goals now means you can put a plan in place to achieve them. While the research found over 55s are keen to carry on experiencing new things, it also discovered they could be held back.

Nearly half (43%) of over 55s said they’d regret not achieving their bucket list items. A third (36%) cited lack of money for the reason they haven’t yet achieved goals. For others, work and family commitments, or poor health was holding them back.

Making your goals part of your financial plan can mean you have the confidence to pursue them.

Do you have enough to complete your bucket list?

As you retire, it can be difficult to understand how your assets will create an income. Often, you’ll need to bring together multiple sources of income and consider how your needs will change over decades. As a result, you may not be sure if you’re able to tick off bucket list items without placing your financial security at risk.

Financial planning can help you understand if you have enough to reach all your retirement goals. It can help you understand how all your assets, including pensions, savings, and property, can work together to provide an income in retirement.

However, for those unsure if they have enough for once in a lifetime experiences, the real value of financial planning comes in understanding how their decisions in early retirement will affect the rest of their life. If you withdraw a £30,000 lump sum from your pension to travel the world, would you still have enough for the rest of your retirement? What would happen if you needed care later in life? Would spending now to turn a dream into a reality mean you’d have less choice?

We can help you put these decisions into perspective. Using cashflow modelling, we can help you visualise how spending to complete your bucket list will affect your income in the short and long term. This means you understand the full implications of the decisions you make.

In many cases, we find retirees can meet their goals or that there are steps they can take to release capital from other assets. Financial planning can give you the confidence to pursue your dreams, whether that’s booking an exotic holiday or booking tickets to a sporting event you’ve always wanted to attend.

If you’d like advice as you retire that considers your aspirations, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

When you review your pension, it’s likely to be the forecast that you focus on. This figure is designed to give you an idea of how much your pension will be worth when you reach retirement age. However, the sum is based on certain calculations, and a report suggests some results could be too optimistic, potentially leaving you with less money in retirement than you expect.

What is a pension forecast?

Most workers are now paying into a defined contribution (DC) pension. This is when you and, in most cases, your employer make contributions that are then invested. Once you reach retirement age, you’re able to access this lump sum to create an income. As a result, the amount you have for retirement depends on contributions and investment returns.

You should receive an annual statement from your pension provider, which will include a pension forecast. However, this sum is not guaranteed and is based on certain assumptions. These assumptions could include investment returns, your contributions rising due to pay increases, or the rate of inflation. These assumptions differ between pension providers.

The assumptions made can have a huge impact on the forecast that’s given.

Pension investment returns have fallen, and it could affect the accuracy of your forecast

A new report from Interactive Investor suggests the assumptions made about investment returns can vary widely and some providers are being too optimistic, especially as returns have fallen in recent years.

The Financial Conduct Authority (FCA) publishes pension investment performance figures every four to five years to ensure projections are realistic.

The findings show return assumptions are not consistent, ranging from 4% to 7% for shares. In fact, data shows the average real rate of returns could be significantly below this range. In 2007, the average rate of return on pension statements was 4.2%, and in 2017 had fallen to 2.4%.

Lower than expected returns when saving for a pension could have a huge impact on how much you have. An example in the report highlights this:

A worker automatically enrolled into a pension at age 22 and on a typical wage for someone in their twenties, would have a pension forecast of £131,000 assuming an investment return rate of 4.2%. However, using the most recent return assumptions (from 2017) of 2.4%, the forecast would fall to £85,000.

Basing your retirement plans solely on a pension forecast could mean you fall short and need to make adjustments.

How does your pension forecast relate to your retirement plans?

As well as assumptions affecting pension forecasts, it’s also important to consider what a pension forecast means for your retirement lifestyle. How much do you need to save to secure the retirement you want?

There are lots of “rules”, such as needing two-thirds of your working income to maintain your lifestyle in retirement. But this doesn’t consider your circumstances or what you want your retirement lifestyle to look like.

To understand if your expected pension lump sum is enough for you, you first need to think about the retirement you want. If you will still have debt when you enter retirement, such as a mortgage, the amount you need once giving up work is likely to be higher than the rules suggest. On the other hand, you may plan to spend more in retirement if you want to travel or upgrade your home.

You’ll also need to think about other factors when assessing your pension lump sum, such as:

• How long will your pension need to last?
• Will your income needs change throughout retirement?
• Do you need to plan for potential care costs?

So, it’s not just how the pension forecast is calculated that you need to work out if you’re saving enough, but what you want your retirement to look like.

How financial planning can help you understand your pension savings

Financial planning can help you understand both how your pension contributions may increase over your working life and the lifestyle you can then look forward to. By taking a tailored approach, you can make sure your pension is on track to achieve the retirement you want.

It also provides you with an opportunity to consider potential risks to your plans and take steps to minimise them. For instance, what would happen if your pension investments underperformed? And could you afford to retire early if you become ill?

Financial planning can help you have confidence in the steps you’re taking to prepare for retirement. If you’d like to discuss your pension, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Since Pension Freedoms were introduced in 2015, retirees have had more choice when they access their pension. However, it also means you have more responsibility for generating an income later in life and it’s important to understand what your options are.

Our latest guide explains the basics you need to know, including:

• Why it’s important to have a retirement plan in place
• Your different options, such as buying an annuity or taking a flexible income
• The pros and cons of the different options available to you.

Download “Your retirement choices: how to generate an income later in life” and start planning for your retirement.

It’s never too soon to start thinking about retirement. The decisions you make when accessing your pension for the first time can have an impact on the rest of your life. Setting out a plan now can make sure you stay on track, whether the milestone is just around the corner or decades away.

Talking about homes and property values is something of a pastime in the UK. Property is probably among one of the largest assets we own, so it’s not surprising that we want the value to go up.

While property prices have soared in recent years, investing in your home could push up its value even more. Whether you like to take on projects yourself or hire a professional, our latest guide explains ten things you could do to boost the value of your home, including:

• Creating extra living space by converting the loft
• Updating your bathroom
• Showing your garden some love
• Converting a room into a home office.

Download “10 things that could increase the value of your property” and discover how to boost the value of your home.

When you want to unwind, what do you do? Maybe you go for a run or put your feet up with a book? However, research suggests one of the best things you could do is turn up some music. But don’t just put on any tune – 80s pop could be the best at reducing anxiety.

Researchers hooked up over 1,500 volunteers to blood pressure and heart rate monitors and then played them a variety of music. Songs from the 80s were the most effective at reducing stress, according to a report in the Daily Mail. It discovered the likes of Wham!, Pet Shop Boys, and Duran Duran can reduce blood pressure, an indicator of low anxiety, when compared to other genres. Some 96% of volunteers were less anxious when listening to 80s music.

High blood pressure can have a serious impact on your health, including increasing the risk of a heart attack or stroke. In some people, feelings of anxiety or stress can trigger high blood pressure. While choosing the right music isn’t a substitute for lifestyle changes or medical treatment, the findings present an interesting view on how music can improve wellbeing. 

Other genres had a positive impact on wellbeing too, including 2000s pop and even heavy metal. In contrast, techno, dubstep, and 70s rock anthems made blood pressure rise.

The music genres that had a positive impact might seem like a strange mix. The researchers suggest upbeat pop music can induce endorphins and serotonin in the brain, which increase feelings of happiness and calm. They also propose that heavy metal music can help listeners process feelings better, leading to lower levels of stress.

The new study challenges previous research, which indicates calming classical music is more likely to reduce stress. So, is it just the beats that are leading to less anxiety? Nostalgia is likely playing a role.

Why a bit of nostalgia is good for you

Music can take you back, sometimes decades. A favourite tune from the 80s might transport you to simpler, more carefree times in your past. In some cases, it might also be the memories associated with the music that has a calming effect.

In the past, however, nostalgia wasn’t seen as a positive emotion.

When the term was first coined in the 17th century, it described a medical condition and form of melancholy. It was associated with a yearning for the past. That may be true in some cases, but many people feel nostalgic when they fondly remember past experiences while still enjoying the present.

Clay Routledge, a professor of management at North Dakota State University, who has recently published a study on nostalgia, set out some of the benefits of reminiscing about the past in a Wall Street Journal article. These include:

• Helping to find creative inspiration
• Improving self-confidence and optimism
• Helping people feel more connected
• Providing a greater sense of meaning
• Offering motivation to pursue goals.

In fact, a growing body of evidence suggests nostalgia can be a good thing and even help you move forward in life. Routledge notes that while nostalgic memories often contain a mixture of emotions, the positive usually outweighs the negative. Revisiting childhood memories or important life events doesn’t have to be a negative experience – it can be valuable.

“Step back in time”

Sometimes we’ll be nostalgic due to how we’re feeling, but more often there’s a specific trigger. It could be the smell of dinner cooking that takes you back to your childhood home, a chat with an old friend that reminds you of a holiday, or a certain song playing on the radio.

Listening to music can evoke strong memories. Research suggests that because music provides a rhythm and rhyme, it can help unlock memories we have stored but can’t quite remember. With the right music playing you may be able to retrieve every detail of a certain event but struggle without the soundtrack. There’s a strong link between music, memory, and emotions.

Putting on the right playlist could let you “step back in time” (released in 1980!) a la Kylie Minogue, and go a long way to improve your mood.