'What if?' This is one question that has left many of us thinking. "What if I had invested at that point of my life. I would have tripled it till now."
Table of Contents - Don’t let the fear of missing out (FOMO) get the best of you
- Looking for an example?
- Understanding FOMO
- Preventing FOMO from impacting your investment strategy
- Here are our top tips on how to make more innovative investments and to avoid investment driven by FOMO:
- FOMO - The Fear of missing out
This was just one example of a 'what if' moment that comes in an investor's career at one point or the other. There are times when investors miss the opportunity of investing, either deliberately or by luck, and later see that investment shooting the skies.
And a 'what if' moment is sure to come in every investor's life, at least once. So, if you have not had such a moment, beware!
Now, after experiencing a 'what if' situation, wise investors will let it be and continue their search for more profitable securities to furnish their portfolios with. On the contrary, the no-so-savvy investors will overreact and grasp the very next opportunity that comes their way without thinking of the possible outcomes.
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Looking for an example?
Imagine that you found a property that you happened to come across a few years ago. That property has tripled in value over the years. You feel all sad and distressed.
Now, you see your fellow investors capitalizing on properties that may seem to you, at that time, the next big-ticket to the moon. There are chances that you question yourself; "What if they invest and their investment proliferates, and I don't invest?"
Let us give you a sneak peek of what might happen next. You will invest out of haste without even doing your research. This is called the Fear of missing out, or, more commonly termed as FOMO.
FOMO is something that is sure to be experienced by every investor, be it novice or experienced.
Unfortunately, instead of remunerating big time, FOMO leads to investors making impulsive actions. That property which you are now considering your next big-ticket to the moon? The chances are that it will be no more than an oversaturated market that will collapse even before it booms.
So, the next time you make a financial decision just because "others are doing the same" and term it as your' gut feeling' leave a margin for failure, and that too, a relatively big one.
Even though many investments driven by FOMO generate massive profits, the ones that lead to debts are also not small.
However, a few things can daunt an investor's journey towards financial sustainability faster than FOMO.
FOMO is a term nurtured in the age of social media. However, its roots as a psychological notion are much deeper than that.
A psychology student may describe FOMO as a type of 'loss aversion.'
This means that you put your faith in others, believing that their decisions will yield positive results. As a result, you will fear missing out on the opportunity of yielding those high returns and will not spare a minute before making similar investments.
This Fear that you will be left out when everyone else will prosper is called FOMO.
Actions based on the feelings of FOMO have the potential of turning into a confirmation bias. If you miss out on the investment, that confirms that you should have investment and results in regret. Subsequently, if the same investment pays off, it demonstrates the notions and leads to an even bigger regret. Giving in to FOMO gives fuel to it.
Unfortunately, we tend to recognize this bias only when it's convenient. If you overreact and give in to FOMO and your investment crashes, what will you think? That it just wasn't meant to be, isn't it?
Looking at FOMO from a broader perspective than just a psychological trick of the mind, it is also a type of social anxiety. If you see fellow investors making gains without your participation, you will have a feeling of loss.
Studies claim that anticipated losses drive behaviors twice as strongly as gains expected, which best explains FOMO's control over investors.
However, in such cases, the lesson that we have been taught from childhood that 'it is not always bad to stand out from the crowd' comes to the rescue. Remind yourself that if all your friends would start jumping off of bridges, would you do so too?
Preventing FOMO from impacting your investment strategy
Here is the good news! You can free yourself from the adverse effects of FOMO with proper preparation.
The process starts by developing long-term investment plans to help you achieve your desired target. Now, the trick is to focus on the goal and stick to the program without being distracted by other trendy investment opportunities that may come your way.
Here are our top tips on how to make more innovative investments and to avoid investment driven by FOMO:
Set a goal
The foremost step to draft yourself a successful investment strategy is to outline your long-term investment ambitions. Are you planning to accumulate a considerable amount of personal income, or do you want to generate an additional income apart from the retirement pension?
You were having a clear and consistent vision of where you want to stand in the long run. If you do not have a sold goal for which you want to start working now, then your investment habit will take very little time to become no more than an expensive hobby.
Construct a plan
After outlining your future goals and ambitions, construct a detail-oriented yearly or quarterly plan to help you achieve your long-term goals.
The plan should envisage your goal. It should contain all the necessary particulars regarding the annual budgets, income expectations, and the like.
One thing to keep in mind is to keep it realistic by perceiving the number of properties and the amount of capital you will require.
Investment trends are generally for a limited period. The value of property depletes as quickly as it increases. To avoid jumping on the bandwagon, an easy tip is to keep a critical eye on investment opportunities other than those included in your plan.
Even though it is essential to reevaluate your plans from time to time, you should not wander off far from your original method. Also, if you consider making some adjustments in the plan, assess even the most minute changes to make sure that they fit the essence of your goals.
Keep reminding yourself that you do not need to follow all the trends blindly and that getting sidetracked by them will only lead you further away from your target.
Keep a long-term perspective
Finally, keep a long-term perspective. Even though things might not always work out according to your plan, and you may find yourself a bit off track, maintaining a long-term view will keep you encouraged.
If, in the process, you end up making a bad investment, consider it part and parcel of the investment business and view it in the light of your long-term plan.
Finally, remember that YOU ARE GOING TO MISS OUT. There are opportunities everywhere, and you can't avail of them all. It is unavoidable for you to miss out on some of the advantageous investments, but the aim is to shoot for what you are confident in.
Stick to your goals
Consistency is the essence of making a highly impactful and highly remunerative investment that can alter your portfolio in one go. Even though establishing long-term plans may seem a bit off and a bit too much to commit to, but in the end, it will be worth all the effort.
So, should you ever have to give in to FOMO? We do not think so! But if you do so, make sure not to get carried away with it. Always draw a line between decisiveness and impulsiveness. This way, you will not have to make decisions out of haste and end up in waste.
FOMO - The Fear of missing out
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