Do you find yourself checking your stock portfolio frequently, even when there’s no real news to warrant a look? Do you feel like you’re missing out if you’re not constantly monitoring the market? If so, then you may be suffering from FOMO – the fear of missing out. This phenomenon is nothing new, but it has taken on a whole new life in the digital age.
How FOMO Shapes Investment Strategy
In this blog post, we’ll explore how FOMO shapes our investment strategy and what we can do to overcome it.
What Is FOMO in Investing?
FOMO, or the fear of missing out, is characterized by a constant feeling of anxiety that you’re not doing enough – in this case, that you’re not investing enough. This can lead to impulsive decisions, as investors try to make up for lost time by putting all their money into one stock or sector. This can be a recipe for disaster, as we saw during the dot-com bubble of the late 1990s.
FOMO is driven by a number of factors, including social media, 24/hour news cycles, and the ever-present fear of being left behind. With everyone’s portfolio and investment strategies on display for all to see, it’s easy to get caught up in the comparison game. When we see our friends and peers making money hand over fist, it’s only natural to want to do the same.
How Does FOMO Affect Your Investment Strategy?
FOMO can lead investors to take on more risk than they’re comfortable with in an attempt to keep up with the Joneses. It can also cause investors to buy into a hot stock or sector just as it’s about to peak, leading to losses when the market corrects.
FOMO can even cause investors to abandon their investment strategy altogether. If you’ve been sticking to a long-term, diversified approach but find yourself constantly worrying that you’re missing out on the latest hot stock, then FOMO may be to blame.
The first step to overcoming FOMO is to recognize that it’s affecting your investment decisions. If you find yourself constantly looking at your portfolio or checking the market news, ask yourself why. Are you worried about missing out on a big gain? Are you concerned that your portfolio isn’t performing as well as someone else’s? Once you’ve identified the source of your anxiety, you can start to take steps to address it.
If you’re worried about missing out on a big gain, try to remember that most investments don’t make headlines. The stocks and funds that do make headlines are usually the ones that have already had a big run-up in price. By the time you hear about them, it’s often too late to get in.
If you’re concerned that your portfolio isn’t performing as well as someone else’s, take a look at your investment goals and time horizon.
Take Proper Rest before Your Make a Decision
It’s important to have a clear head when making investment decisions. If you’re feeling anxious or stressed about your investments, take a step back and take some time to relax. Go for a walk, read a book, or take up a hobby. Once you’ve cleared your head, you’ll be in a better position to make sound investment decisions.
Avoid Impulsive Investments
One of the best ways to overcome FOMO is to avoid impulsive investments. If you’re feeling pressure to buy a stock or get into a sector, take a deep breath and ask yourself if it’s really a good idea. Is this an investment that you’ve been thinking about for a while? Does it fit into your overall investment strategy? If not, then it’s probably best to avoid it.
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Invest Regularly and Automatically
One of the best ways to overcome FOMO is to invest regularly and automatically. By investing a set amount of money each month, you can take advantage of dollar-cost averaging. This technique can help you smooth out the ups and downs of the market and avoid making impulsive decisions.
Stick To Your Strategy
When it comes to investing, slow and steady usually wins the race. If you’re sticking to a long-term, diversified investment strategy, then chances are you’re doing just fine. Remember that investments can go up and down in the short-term, but over time they have a tendency to move higher. Stay the course and don’t let FOMO get the best of you.
Don’t let other People Manipulate You into Making Investments You Don’t Want To Make
If you’re feeling pressure from a friend, family member, or financial advisor to make an investment, take a step back and ask yourself if it’s really right for you. Just because someone else is doing it doesn’t mean you have to as well. Stick to your guns and only make investments that you’re comfortable with.
The bottom line is that FOMO is a natural human emotion, but it can be detrimental to your investment strategy. If you find yourself making impulsive decisions or abandoning your long-term goals, take a step back and ask yourself why. Once you’ve identified the source of your anxiety, you can start to take steps to overcome it.
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Josh is an entrepreneur and financial expert with over a decade on Wall Street as an economic strategist. His career started in finance, progressed to owning multiple business, and now shares his insights and life hacks with readers of DailyWisely.com.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently shares his financial expertise in investing, wealth management, capital markets, taxes, real estate, and personal finance on his personal finance site, Top Dollar Investor.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business.
Josh is the owner of Top Dollar and Daily Wisely, the former focusing on personal finance and wealth building strategies, while this site focuses on living well and enriching content that Josh curates with his team.