Fear of missing out on a new investment trend
Fear of missing out on a new investment trend
Do you know ‘FOMO (Fear of Missing Out)’ is the most common emotion in the investing world today? The fear of losing out on what is hot in the market adds up to anxiety and irrational decisions instead of disciplined investing. It is important to stay focused on your long-term financial goals without falling prey to the fear of missing out on the latest investment trends. Read on to know how the FOMO factor can influence your financial journey and financial success.
The biggest secret to successful investing is to stick on to long-term investment strategies that are aligned with your financial goals. Making an investment decision based on greed or fear can be one of the major reasons to fail as an investor.
What is FOMO (Fear of Missing Out)?
FOMO or Fear of Missing Out is a psychological phenomenon that motivates or makes a person anxious to take certain actions to not miss out on amazing opportunities that others are already talking of the benefits. Nobody likes to get left behind. For example, you see a festival offer going on a certain product that everybody is talking about. Following the herd, you will also buy that product even if you do not need it with the fear of missing out on the best. The same gets applicable when it comes to investment opportunities.
How does FOMO affect investors?
Fear of missing out on new investment opportunities can hugely impact you as an investor. When you hear your friends, relatives or colleagues have bragged windfall profit from the equity market or from any other investment option, it is quite natural to get envious or dissatisfied with the returns that your investment has delivered. This emotion of fear can ultimately affect your investment decision-making and can potentially distract your financial plan. We need to avoid falling prey to the fear of missing out on investment trends. Here are some important steps to actively avoid FOMO while investing.
- Make goal-specific investments
The first step in financial planning is to identify your short-term to long-term goals. Once you know your goals and evaluate your risk profile, you need to choose the investments that fall in line with your goal for a suitable time frame. Instead of following what others are investing in, your investment approach should be personalised to your goals. This helps you stay on track to reach financial freedom. For example, let’s say you need to invest or plan for a new car that you are planning to buy after two years. In this case, you can invest in debt investment options that you can liquidate after two years. You cannot follow the ‘hot tips’ if that is related to investment options like real estate and equity that are suitable for the long term.
- Design a strategy to meet your goals
Once you know your goals, you need to design a strategy to meet those investment goals. For example, when you are planning for your retirement goals, you can invest in a combination of long-term investment options such as investing in equity mutual funds via the systematic investment plan (SIP) route, National Pension Scheme (NPS), and post office saving schemes. The strategy should be designed based on your risk tolerance level and the time frame that you have to reach retirement years. It is not wise to invest all your money in a single investment product even if everyone is talking about it.
- Do your own research
Instead of following the market sentiments, you need to do your own due diligence. You may hear from your colleague or friend that they have bragged about a great return on a certain investment which may motivate you to go with the same investment. But it is important for you to realise that the individual requirement of your friend and you may vary and the result may also differ with the time of investment. Your investment may perform much better than your investment or even worse. Hence, it is crucial for you to do your own research, understand the product, and figure out which investment works the best for you.
- Be patient and focus on long-term growth
Financial planning is a continuous and long-term process. When you take a long-term and disciplined approach to your investment keeping the focus on the finish line, stress can be reduced and serious FOMOs can be avoided. The most successful investor, Warren Buffett once said, ‘’ Be fearful when others are greedy and be greedy when others are fearful.’’ Wild market movements fuelled by investor creates a desire in you to gain short-term money. Such hot tips should not be followed in order to avoid emotion fuelled investment decisions. The best way to attain financial freedom is to formulate long-term strategies.
