Broker Check

Investment Perspective: Fear of Missing Out (FOMO)

| February 23, 2021
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Fear of Missing Out (FOMO)

With news and alerts constantly buzzing on our handheld devices, it is difficult to maintain a steady disposition in our investing. This outside noise can create a fear of missing out (FOMO).
 
It is hard to ignore when others brag about their investment successes. Their excitement may cause us to worry we are missing out on big investment gains.

Rarely does one quickly get rich from investing, and for every dramatic success there are likely multiple catastrophic failures. Why take a chance with your future? 
 
This need for instant gratification can be damaging to our investment decisions.
 
Similar to FOMO is performance chasing. People often look at the stocks or funds that have performed exceptionally well recently, then buy them expecting similar results. This is dangerous. Investing decisions today should be based on the future, not the past.
 
Recent examples of investors & FOMO include:
  • Tesla, Nikola, & electric vehicles
  • GameStop & AMC/The Reddit Trades
  • Bitcoin/cryptocurrencies
  • SPACs (Special Purpose Acquisition Companies)
Whether or not these are good investments, many of the people piling into them have been doing so based on FOMO and not fundamentals.
 
One question to ask ourselves before investing in something is: What is the main reason I am investing in this? Our investing decisions should not be based on FOMO or trying to get rich quick.
 
Investing based on principles can lead to success; however, building wealth takes time, discipline, and patience.
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