Many decisions like these we come to regret were borne out of a fear of missing out, or as the kids say “FOMO”. Essentially a fear of regret actually causes us to do something we will later regret. Funny how that works.
Financial decisions are very susceptible to this, especially investing. Part of this is driven by messages in the media. I wish I had a dollar for every article that
These ideas go beyond individual investments to whole asset classes. Our philosophy around investing is global in nature. We believe you should be diversified beyond the United States. But what happens when you have a streak of out-performance in one or the other? Should you switch back and forth or invest in both and hope for a smoother, albeit less exciting, ride. We believe in the later. The problem with investing is it takes years to see the results and a lot of patience to overcome FOMO and switch at the wrong time.
There is a saying about diversification in portfolio management which is if you don’t always hate something that you own you aren’t doing it right. The whole point is to own things that are not all alike to when one goes down another might go up. That creates a smoother ride, but sometimes is will appear like you should have gone “all-in” on one.
We’ve included a little chart representing someone holding all US stocks, all International stocks, or a 50/50 mix. The top graph shows how this works conceptually. Sometimes one is on top and sometimes that other is. When you hold both you get a result in the middle. The bottom graph illustrates how this makes you feel compared to owning only US stocks. You love it. You hate it. You love it. You hate it. Rinse and repeat.
You may always hate something you own but with a long enough time horizon the benefits of a smoother rider become apparent.