2 Incredibly Costly Mistakes Too Many Investors Are Making Right Now
FOMO and trying to time the market can be big investor mistakes.
2 Incredibly Costly Mistakes Too Many Investors Are Making Right Now
Overview
When the stock market is climbing higher, investors often make two common mistakes. One is that they will chase high-flying stocks without any regard to valuation or the long-term outlook for a company's business. This is often referred to as the fear of missing out, or FOMO.
Now, just because a stock has skyrocketed higher does not automatically mean it isn't a buy. For example, if you bought Nvidia (NASDAQ: NVDA) up after a 500% run, you would still have been able to make a lot of money on your investment. In the case of Nvidia, the company was a market leader with a wide moat that continued to see extraordinary growth and generally traded at a reasonable forward price-to-earnings (P/E) valuation. In fact, that is still the case today, and it's why the stock still looks attractive even after a 1,030% gain over the past five years.
Details
However, Nvidia is more of an exception than the rule. In fact, J.P. Morgan found that between 1980 and 2020, more than 40% of stocks in the Russell 3000 suffered losses of 70% or more, from which they never fully recovered. That is why FOMO can get investors in trouble.
Source
Originally published at www.fool.com.
