How To Deal With FOMO In Investing: FOMO – The Fear Of Missing Out. It is a concept or feeling that people before the smartphone era would rarely understand. Now, with the gift of social media, everyone is engaged in the feeling of FOMO.
Usually, the idea of FOMO applies to fun events such as concerts and vacations, but this has also crept its way into the world of investing. This blog discusses the idea of FOMO in investing and also tells you how to deal with FOMO In Investing.
What Is FOMO In Investing?
FOMO basically means the fear of missing out, specifically on events or experiences that other people are having. In investing, FOMO could mean different things, like –
- Not Investing at all when all your peers are involved in the market (Actively or Passively).
- Not buying a stock recommended by someone you know and seeing it give great returns.
- Comparing your portfolio with that of people your age.
- Having lesser knowledge about the stock market than your peers.
As you can see the fear of missing out on investing can manifest itself in different ways. It is not necessarily from the lack of investing itself.
Even having a lack of knowledge on the subject, and therefore the experience of missing out on making returns can spiral a person into having this feeling.
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How To Deal With FOMO In Investing?
What most market beginners might not realize is that even the biggest ace investors experience FOMO in investing. Even big names like Warren Buffett have experienced regret and missed opportunities in the stock market.
Did you know that one of Buffett’s biggest regrets is buying Berkshire Hathaway? When he purchased the company, it was a dying textile-making company.
This bad bet led him to lose more than he bargained for as he tried to keep the textile business alive for 20 years. He estimates that this move cost him $200 billion dollars (CNBC).
The feeling of FOMO in investing can be changed into a productive and positive force if you are really keen on investing in the markets. Here are some tips on how to deal with FOMO in Investing –
1. Invest In Educating Yourself
Before investing and parking your hard-earned money into any sort of asset, we suggest investing in educating yourself about investments, finance, the stock market, and reading annual reports.
Through online learning platforms like Fingrad, you can teach yourself, at your own pace, about investing as well as trading.
You can use this time to explore the different types of investment opportunities that are available in the market.
Alternatively, if you want to employ a financial advisor, you can discuss your interests with them regarding your financial plans’ risk tolerance, among other things. Either way, a little learning can go a long way.
2. Have an investment/financial goal
The idea of investing is more than a one or two-day event. It is a mantra that is followed throughout a lifetime. Building such a habit takes practice, patience, and resilience.
Often we find temptation in spending rather than saving and investing. Before making a large purchase, remember that money could take you one step further towards retiring early if you invested it instead.
Having an investment goal can bridge the gap between a dream and a realistic timeline. FOMO can be reduced if you look within yourself and find the root cause of this feeling.
It could be a large upcoming expense, peer pressure, or personal desires such as buying a car or bike, taking an international vacation, etc.
3. Do Your Own Research
Usually, FOMO is linked to not having the same experiences as others. In this case, it’s investing. You should know that the investors you interact with on a regular basis might have done a lot of studying, practice, and experience in the markets before succeeding.
Every investor, over time, learns and works with what they can understand best. This is why you, as an investor, should do your own research before indulging in FOMO in investing.
Experiencing FOMO in investing can be caused by several factors, but the most common one is watching other investors reap rewards from the markets. When you experience this, it’s important to know that their risk appetite is not the same as yours.
Multibagger returns are rare, and in the overconfidence of chasing multibaggers, people tend to overlook steady and consistent returns from large-cap, blue-chip stocks.
Before you invest based on experiencing FOMO, diversify your portfolio to include a balance of different types of assets, not just stocks.
Consulting a financial advisor can help you attain this goal and build up your portfolio.
Experiencing waves of emotion when it comes to investing is common and natural. When it comes to our hard-earned money, we tend to have an attachment to it given that it came with a lot of effort and time.
We all experience FOMO in investing but the trick is to learn how to deal with FOMO in investing, even after entering the markets.
We hope you found this blog informative and interesting. To learn more about investing, JoinFingrad!
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