Don’t suffer from FONGO

I’m sure every reader has heard of ‘FOMO’, the Fear Of Missing Out. It can make you invest in shares that have skyrocketed in price, but you don’t want to miss out on even more gains. It can make you refresh your phone wanting updates on the ASX, Facebook or Instagram.

However, I recently came across a fun, new acronym: FONGO. It stands for Fear Of Not Getting Out.

In an article by Chris Kohler for Domain Holdings Australia Limited (ASX: DHG), AMP Limited (ASX: AMP) Capital chief economist Shane Oliver said that many investors may look to sell to avoid suffering from a several-year property downturn.

He thinks that prices in Sydney and Melbourne could fall another 10% to 12%.

Worrying about property falls and selling reveals a number of things to me. Firstly, any investors who are selling weren’t buying for the long-term. Seemingly they were just speculating that prices always go up over short periods of time.

Property prices falling could actually be a good thing for people moving. Consider this: if they pay a percentage-of-sale real estate agent fee, then the dollar amount paid to the agent will be smaller and the stamp duty of their next house purchase will be smaller. Most importantly, the property they’re moving to could fall 0.5% or 1% in price between the time they sell their house and buy the new one. In a rising market the mover’s new property could be 1% higher during the switch – which could amount to many thousands of dollars!

FONGO can also be applied to shares. If you buy a share at $5 and five years later it reaches $10, does it matter what happens in between? Even if in the first few months it falls to $4 or $3.50? As long as your investment thesis hasn’t changed that share has likely become even better value. That could be the time to top up on those shares.

Foolish takeaway

It’s important to not let fear dictate your financial decisions. Nearly every finance choice should executed thinking logically not emotionally. Who knows what property prices will do next? People fearing property price falls can self-perpetuate into prices falling.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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