Every single one of us can relate to the feelings created by FOMO, the fear of missing out. In our social lives, we can experience it any time we get invited to a party, vacation, special event, or concert and for some reason, we aren’t able to be present for all the fun we believe others will having without us. Studies show that FOMO leads to extreme dissatisfaction and has a detrimental effect on our physical and mental health; mood swings, loneliness, feelings of inferiority, reduced self-esteem, and increased levels of negativity and even depression. FOMO is not just the sense that there might be better things we could be doing, but we feel that we are missing out on something fundamentally important that others are experiencing. Due to the significant psychological impact FOMO can have, it isn’t hard to understand how it can easily invade our financial lives and influence our investment moves. Money is Personal™. Therefore, emotions can play a pivotal role in how inexperienced investors make decisions, which can lead to detrimental financial mistakes.
So how does FOMO begin to creep into our financial lives? A friend brags to you about all the money they’re making in a particular investment and subtly shames you for not being in the deal. You read an article about a company that is having explosive growth and the shareholders are receiving triple-digit returns, but you don’t own it. Your neighbor comes over for a glass of wine and shares that she is actively trying to “buy low” given the decreasing prices in the volatile stock market. You go to lunch with a co-worker and they’re overjoyed because they recently purchased their third rental property in an emerging neighborhood. They are receiving an above market-rental rate, yet, you don’t own any investment properties yet or the ones you do own are underperforming.
As we find ourselves in these types of situations in our lives, we begin to perceive that others are winning at the financial game, they are having more fun and living better lives. These feelings can begin to create a deep sense of envy and harmfully impact our self-esteem. We begin to doubt our investment decisions which can increase our anxiety surrounding our ability to achieve our financial goals.
Naturally, this leads us to ask what steps we can take to avoid FOMO in our investing behavior. Here are 5 strategies to mitigate investment FOMO from damaging your mental and emotional wellbeing. Each of the following steps begins with your ability to first recognize that you are currently in an emotional state of investment FOMO. Self awareness is a critical muscle to build to develop more self-control and the investment discipline necessary to succeed as an investor.
1) Realize You Might Not Actually Be Missing Out – This is accomplished by creating what is known as psychological distancing, which is the use of language to put mental space between you and whatever reactionary monetary temptation you are struggling with. Talk to yourself in the third person as another person would: “J.P., you’ve made smart investment decisions that are appropriate to your goals and their investment victory isn’t connected to your situation..”
2) Consider If You’re the Cause of Your Own FOMO – Create an alter ego. Imagine you are a different person, a more capable and experienced investor (i.e. Warren Buffett) and ask yourself “What would Warren do in the same situation?” Pick your investment superhero and model them!
3) Be Okay with Not Being Able to Do It All – Give yourself some grace and accept the reality that you don’t have a crystal ball or the time and resources to be in every winning strategy. Take a walk down memory lane and recall a time in your past when you successfully kept your resolve and overcame previous financial challenges.
4) Ask Yourself If Your FOMO Is About Something Bigger – Consider whether this FOMO dredges up feelings of general unhappiness in your life and insecurities. If so, you may need to take the necessary time to figure out what the root cause is and evaluate how to change it.
5) Imagine Your Future Self – Visualize yourself in the future, the way you want to be so you can connect your actions to your future goals. Ask your future self for advice and then take it!
Investment FOMO might seem difficult to fight off, but with a little practice, we can all be better at avoiding it. By using the tips mentioned here, you can help yourself feel a bit calm, cool, and collected the next time you feel you are missing out on an investment victory.
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by J.P. Dahdah, CEO, Vantage Self-Directed Retirement Plans