The Price of Fear-Of-Missing-Out (FOMO) Is Expensive

The market has a way of humbling me.

In mid February, my portfolio was hitting all time high in value, and I got over-confident.  In fact, I was ignoring the greedy sentiments on the ground, and I chased Development Bank of Singapore (DBS), Aims Apac REIT (AAR) and CapitaLand Integrated Commercial Trust at above SGD 57.50, SGD 1.50 and SGD 2.45 respectively.  At that point, prices were running, sentiment was strong, and the urge to “just get in before ex-dividend date” felt rational.  After all, as a dividend investor, being able to get more dividend income in the next payout seemed to have more pros than cons?  However, the fact is ex-dividend date is 2 months away, and I could have waited for price to correct and valuations to be more reasonable before dipping my toes into buying the shares.

Lo and behold, then the Middle East war headlines hit.  Risk sentiment turned immediately and the classic “dog and owner” analogy returned, where prices (the dog) running too far ahead of fundamentals (the owner) eventually get pulled back.  Mean reversion is undefeated.

It did not apply to just local banks.  Many US tech and AI names that were up 30–50% from their lows corrected sharply too.  Stocks that were sprinting ahead of valuations are now catching their breath.  The market does not reward impatience forever.  This is where I remind myself that "dividend investing does not give me a free pass to overpay".

The dividend is important, but valuation is more important.  If I overpay by 10 to 15%, the next quarterly dividend does not compensate for that.  In fact, rushing in just to “secure” a payout before the ex-dividend date is often an illusion.  On ex-dividend date, the price typically adjusts downward by roughly the dividend amount anyway, sometimes more, sometimes less.  There is no free lunch.  I know this intellectually, but emotion sometimes overrides logic.  That is the real lesson.

As someone building towards financial independence and relying on dividend flows for psychological comfort, I must remember that income investing is still investing.  Yield does not replace discipline.  A 5% dividend yield bought at stretched valuations can easily become a 5% yield with 15% capital drawdown.  Patience is also part of the dividend strategy.

Markets will always give opportunities.  Fear will always return.  Volatility will always create better entry points.  However I am always torn regarding this matter.  My head tells me logically that my job is not to chase, but to allocate capital rationally when risk-reward is in my favour, however my heart tells me not to wait for too long as cash set aside often yield little to no returns.

This episode also reinforces something I have been thinking about for a while.  Perhaps I should sub-allocate my funds set aside for investing into two parts, one for consistent reinvesting, one set aside for reinvestment only when prices fall to moving averages or below.  More in-depth thinking is required on my part to enhance my investment strategy, and improve from here.  

I suppose I just need to be mindful that the market will test us repeatedly, through wars, corrections, rate fears, AI bubbles, and sudden 3% drops in our largest holdings.  The real edge is not reacting impulsively.  It is staying patient, respecting valuation, and accepting that missing out is better than overpaying.  FOMO is expensive.  A great lesson and constant reminder would be this post from an expert investor in my opinion, STE, who brought insights to being a patient investor and significance of mean reversion.  I definitely still have lots to learn from him.  Barista FIRE, here I come...!