7 simple ways to beat investment FOMO
Have you ever felt regret or anxiety about missing out on a potentially profitable investment opportunity? We can call it FOMO (fear of missing out) in investing.
It is a very common thing and happens with a lot of us.
However, it is essential to keep the FOMO from getting the best of us. FOMO can lead us to hasty investment decisions, such as buying a stock or a mutual fund without research which can impact us negatively.
So, managing your FOMO and taking rational investment decision is essential.
Let’s see how we can keep FOMO at bay.
Break free from the herd
We all behave differently under different circumstances. Take a moment to reflect on what makes you feel guilty about not investing in the popular option. Do you feel like you lost the chance of gaining big bucks, or do you feel alienated from others?
If you feel the same emotions when you see your friends getting married or going on foreign vacations, the real reason might be envy or your innate wish to fit in.
Many of us want to feel like we are a part of a group. This is nothing but herd mentality. True, this mentality was important when humans were hunters and gatherers, but it can be detrimental when it comes to your finances.
So, instead of giving charge to your emotional mind, bring your logical and rational mind to the centre stage.
Overcome comparison and start investing at your own pace
If you feel you have missed the bus and think you are too late to start investing, there is nothing to worry about. We all have our own timelines.
I started investing when I was 25. Now, I see students who have already invested a decent amount through side hustles. When I was a student, internet access was quite limited. So, it would be wrong if I compared myself with them. Moreover, I have also seen people who haven’t started investing and like to spend their money travelling and living their lives. That is also okay.
So, there is no need to be hard on yourself. If you have realised that you need to invest, you need to plan for your next steps. The main criteria for investing shouldn’t be the action of your peers.
Assess your financial grounds
Now that you have realised the importance of investing, the first thing that you need to do is understand yourself. What type of investor are you? Are you willing to take on higher risks and handle the short-term market volatility of equity investments?
This is not an exhaustive list. But, the important thing is to understand where you currently stand on financial grounds such as your income, debt and other financial obligations.
After considering all these factors, you can determine how much risk you can take on your overall investment portfolio.
It is easy to look up to your friend who has made a massive kill in crypto and regret it. But your financial situation might be vastly different from your friend’s financial status. So, it is essential to know yourself before you catch FOMO.
Identify your investment goals
Raise your hands if you want to earn returns from our investments and see your money double within a short span of time. But have you asked yourself why you want to see your money double?
Leaving aside the fact that it feels good to have more money and splurge on it, we all have different reasons. Some of us want to build a retirement corpus so that we don’t have to ask for money from our children when they are old and grey, while some want to travel to a different country every year for a month.
So, determine your goals and classify them into short-term, medium-term and long-term ones. You can then research to figure out the best way to achieve your goals.
Carry out diligent research
Researching the investment options that give you FOMO is the best way to tackle it. Are you jealous of your friend’s spectacular gains in a small-cap fund or a small-cap stock? Research about that respective fund or stock. You can check the volatility of the fund or stock. You might find that your friend has a high-risk appetite and stayed invested despite double-digit negative returns for a considerable amount of time. But the main question is, do you expect the performance of the fund or stock to repeat in the near future, and do you have the risk appetite to handle the volatility?
No investment strategy works all the time
When you research that particular investment option, you will observe that the investment option didn’t perform well all the time. There will be years when it underperformed its peers and gave spectacular returns for two to three consecutive years. It is because the market works in cycles, and the performance of most investment options comes in ebbs and flows.
Waiting is the best way to curb any FOMO that you are feeling. Everything looks hunky-dory when you are in the honeymoon phase, and then reality strikes.
If you ever experience FOMO, it’s best to wait and observe how the new investment option is doing before making any decisions. Taking time to evaluate will give you a clearer understanding of the situation.