What to Do If You Missed the Latest Market Rally?: The FOMO Trap
A practical guide to overcoming regret, staying disciplined, and building wealth through goal-driven, rules-based investing.
As we approach new highs in the Indian stock markets, many investors find themselves in a familiar position-looking back with regret at the cash they held during the last correction or the SIPs they paused, and now feeling the sting of FOMO as the Nifty hovers just 5% away from its all-time high.
If you’ve read my previous article on the power of combining goals-based and rules-based investing, you’ll know that discipline and not prediction is the real edge. This article builds on those core principles, focusing on how to apply them in today’s fast-evolving market landscape. (If you missed the previous discussion, I recommend revisiting the earlier piece for a deeper dive here: Link)
What’s Changed Since the Last Correction?
The market’s sharp rebound-driven by unexpected FII buying, sectoral leadership, and global optimism-has left many investors flat-footed. Despite a “near consensus” that foreign investors would pull out, they bought aggressively, triggering a 1.5% rally in a single session and pushing the Nifty above the 25,000 mark for the first time in seven months. This is a classic reminder: consensus views and headlines rarely predict market turns.
Yet, most retail investors repeated the same behavioral mistakes:
Sitting on cash, waiting for “clarity”.
Stopping SIPs during volatility.
Chasing rallies after the fact.
Focusing on short-term news over long-term plans.
Why Do We Keep Making These Mistakes?
Behavioral finance research shows that overconfidence, herd behavior, loss aversion, and the urge for action are deeply rooted in investor psychology. These biases are amplified by social influences and a strong desire not to “miss out” when markets run. The urge to do something-anything-often leads to suboptimal timing, buying high and selling low. The lesson: human nature doesn’t change, but our systems and habits can.
What’s Works for Disciplined Investors?
Sticking to SMART, Goal-Based Plans
Investors with clear, time-bound, and personally meaningful goals are less likely to be derailed by market noise. Whether saving for a house, retirement, or children’s education, these investors measure progress by milestones, not market indices. This year’s volatility has shown that those with SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals have remained focused and less reactive.
Rules-Based Execution
A disciplined, rules-based approach-centered on regular portfolio reviews and strict adherence to asset allocation-helps investors stay the course through market volatility. By setting a fixed schedule (such as quarterly or annual reviews) and establishing clear rebalancing thresholds, you ensure your portfolio remains aligned with your goals and risk tolerance. When allocations drift, rebalancing or directing new investments into underweight asset classes enables you to buy more at lower prices, benefiting from rupee cost averaging. This structured process keeps emotions in check, prevents impulsive decisions, and positions you to capture long-term gains, as seen by those who maintained SIPs and stuck to their asset allocation during recent corrections.
The best investors aren’t static-they review their rules and allocations periodically, but they don’t abandon them at the first sign of turbulence. This year’s correction in mid- and small-caps, for example, was a reminder to rebalance rather than panic-sell or chase momentum.
Client Story: Turning Market Volatility into Opportunity with Discipline
Let me share a recent experience that perfectly illustrates the power of discipline and a rules-based approach in investing.
Defining The Goal:
In 2024, I worked with a client to set up a plan for his daughter’s higher education-a goal 12 years away. We established a clear asset allocation:
55% Large-Cap Equity
35% Mid-Cap Equity
10% Small-Cap Equity
We also agreed on a simple, systematic rule:
Every six months, we will conduct a periodic review of the portfolio aligned with your goal. If we find that the asset allocation has deviated from the prescribed levels of 55% Large Cap, 35% Mid Cap, and 10% Small Cap, we will rebalance the portfolio to restore these target allocations.
The Market Correction
Fast forward to early 2025. The BSE Midcap index dropped over 20%, with valuations falling from a P/E of 43x in September 2024 to 31x by March 2025. Headlines were grim, and many investors paused their SIPs or sold in panic, fearing further declines.
The Disciplined Response
My client, however, chose to trust the process we had set. Guided by our pre-defined rules and the clarity of his long-term goal, we rebalanced the portfolio to the prescribed asset allocation. This was not a gut reaction, but a disciplined, planned action. This also meant investing into mid-cap stocks last month when the fear index was at all time high.
The Outcome
By staying invested and buying more mid-caps at lower prices, my client benefited from rupee-cost averaging and positioned his portfolio for stronger compounding as the market recovered. Historically, midcap SIPs over 10-year horizons have delivered robust positive returns, even through periods of sharp volatility. As confidence returned and midcaps stabilized, his portfolio was well-positioned for long-term growth-precisely because he stuck to the plan and didn’t let emotions dictate his decisions.
Let me be clear: I am not suggesting that I could have predicted the swift recovery in mid-caps. In fact, between our review date and today, we witnessed a significant escalation in the India-Pakistan conflict. Had the situation deteriorated or prolonged, the portfolio’s recovery could have looked very different. My point is not about forecasting market movements, but about the value of discipline-sticking to our goals and the rules we set for ourselves. This is not a mindless “buy the dip” approach; rather, it’s a thoughtful strategy with a defined purpose for every rupee invested and a clear roadmap for achieving our objectives. By adhering to our asset allocation, we ensure that our investment decisions remain aligned with our long-term goals, regardless of short-term market events.
If You’re Feeling FOMO Right Now, Here’s My Advice
Don’t Fall for Market Timing:
If you’re tempted to jump in and out of the market, remember-even the most experienced professionals can’t consistently predict corrections or rallies. Missing just a handful of strong recovery days can make a huge difference to your long-term returns.
Discipline Always Wins Over Prediction:
If you want to see real results, focus on sticking to your plan, keep investing through the dips, and rebalance when your allocations drift. The best-performing investors this year weren’t the ones trying to outsmart the market-they were the ones who stayed the course.
Know Yourself and Your Triggers:
Take a moment to recognize your own biases-whether it’s overconfidence, following the herd, or fearing losses. Put systems and rules in place to keep your emotions from hijacking your investment decisions.
Make It Personal:
Your investment strategy should fit your unique goals, risk appetite, and timeline. Don’t copy what everyone else is doing-there’s no one-size-fits-all solution.
Let Discipline Guide You:
Use tools like SIPs and regular portfolio reviews to help you stay on track and take the emotion out of investing. Consistency and process matter far more than reacting to headlines.
If you’re feeling regret about missed opportunities or are anxious about what to do next, remember: markets will always test your patience and discipline. The real winners are those who combine clear, meaningful goals with systematic, unemotional execution. This recent rally is just another chapter in the ongoing story of market cycles and investor psychology.
For a deeper dive into integrating goals-based and rules-based investing, check out my earlier article here. And above all, stay focused on your own journey-not the market’s daily ups and downs.
Discipline, not prediction, is your most valuable asset.