A famous investor once said to be greedy when others are fearful, and fearful when others are greedy. To that, you might ask, “But Mr. Warren Buffet, what about feeling the fear of missing out (a.k.a. FOMO)?”
You aren’t alone if news around major stock surges (ahem, Gamestop) made you feel financially out of the loop or worried about missing big investing opportunities. But the thing is, these kinds of wild market movements — which are often fueled by investors’ desire to make big money in unnaturally short timespans by playing the market — are fads for a reason. And the stable action for your portfolio in the long-term is to fight the FOMO. So put headlines to the side and keep your eyes on the prize. Here’s how.
Make a strategy and focus long-term.
When a hot stock takes over your news sources, your Reddit feeds and your group chats, it’s natural to think, “I want in.” But oftentimes, stocks that are in high demand (due to recent performance or because their sector is soaring with popularity) cool off just as quickly as they heat up. Unless you’re an experienced trader or have an incredibly high tolerance for risk (and have done your research), this kind of volatility is probably not suitable for your portfolio.
One way to avoid temptation and emotion-fueled investment decisions is to have a solid investment plan in place. That comes from thinking through your long-term goals and formulating a strategy to get there in your desired timeframe. When you are following a plan that builds toward your success, you’ll be less likely to worry about missing out on potential short-term stock plays.
Give yourself some wiggle room.
Having a long-term financial plan is essential. But if you have the monetary freedom (i.e., you’re already funding your retirement, you’ve built a solid emergency savings fund, etc.) you should feel allowed to have a little fun in the market by trying new strategies or taking a chance on a company you love. Still, it’s best to do so responsibly. How? By adding a little room for FOMO into your overall portfolio plan.
For example, let’s say you’re investing the majority of your personal (non-retirement) assets in more conservative securities as you save for goals like a down payment on a future home or furthering your education. You might then feel comfortable reserving a small percentage, say 5%, of your portfolio for investing in meme stocks or other fads. That way, you’ve created space to take on potential risk and be a part of popular market happenings without derailing your entire strategy.
Don’t follow the crowds.
One of the negative side effects of giving into investment FOMO is that it’s often too late to actually reap the benefits you’re seeking.
Here’s an example: You know you generally want to buy low and sell high. But you hear on the news that a certain formerly unpopular stock is gaining traction. Then, some friends on Twitter post that they bought it yesterday and sold their shares for triple the value today. Sounds pretty sweet, right? You decide you want in and purchase at the escalated price. Unfortunately, the stock’s buzz already reached its peak, and the price tumbles back down — and your investment results in a pretty significant loss.
The point is that by the time a stock reaches mainstream news headlines or is trending on social media feeds, the opportunity has likely already passed — and tempting as it may be, succumbing to the grips of FOMO might leave you feeling more like, “Oh no.”
Find expert resources you trust.
So if the evening news or viral social posts aren’t the best places to stay in the know with what’s happening in the market and where you might find growth opportunities, what is? That’s where a little extra homework comes in. A smart way to keep your ear to the market is by doing some research to find trustworthy resources, such as reputable publications or financial experts, that make sense of stock movements. You may find that relying on a few more professional resources helps you weed out or ignore FOMO-inducing calls to action.
No More Stock FOMO
When you hear about someone making it big on a risky play or experiencing wild success on an obscure stock, it’s natural to feel a little bummed you didn’t get there first. But keep in mind, you probably don’t know the whole story. Perhaps that options play was one win after many losses, or the stock profit was the result of a super high-risk investment.
Instead of worrying about potential gains in the short-term, remember that success is a long time coming. And when you stick to your plan and tune out the fluff, you won’t miss out on what’s most important: reaching for your goals.
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