8. FOMO (fear of missing out)

“Don’t believe the hype” – Public Enemy

Fear of missing out (FOMO) is possibly one of our longest and most enduring failings; those religious amongst us would say it goes all the way back to Adam and Eve in the Garden of Eden and that juicy apple.

Fear of missing out (FOMO) is a common emotional investing mistake that can lead to impulsive decisions and poor risk management when investors chase fabulous, exciting, new, shiny and well-marketed ideas. Investors are surrounded by social media, bulletin boards, chatrooms, blogs, podcasts and investing channels on YouTube, and the frequency and level of information disseminated with regards to a single stock, fund, investment company or asset class at any one time can make it extremely overwhelming, for the inexperienced and even the experienced investor.

The confidence of a well-spoken, articulate, well-written and well-meaning individual about e.g. stock X, can lead to private investors being drawn into something which may not be for them and may not be as great, in reality. We can sometimes, make the mistake, through our ‘fear of missing out’ on committing to a ‘surefire, fast-rising, winning, opportunity’, irrespective of where stock X is in its growth journey, revenue generation or even fundraising* activity.

Daniel Kahneman sums this beautifully when he states, “Wherever there is prediction, there is ignorance, and probably more of it than we think.” If we are all thinking alike, then how many of us are actually thinking about the challenges, the risks and the issues? This is not to say that all marketing and sales persuasion is unhelpful, but what it does mean is that you should conduct your own due diligence to make sure that you know what you are buying and what you may realistically gain in return.

*Fundraising activity – means that the marketing and sales persuasion is elevated to gain interest and to increase the return for those who already hold or are looking to sell into the momentum of a rising stock. This often happens with AIM penny shares and private investors can experience a hugely discounted placing after an initial purchase. This can also happen with established, profitable, and even larger market-capitalised companies.

Ultimately, controlling FOMO is about maintaining and improving one’s own strict research strategy and being open to continual learning. Not falling for the next hype stock or asset class. Not believing the investment performance hype of your favoured anonymous Fintwit avatar individual whose proof of buys or sells you have absolutely no clue about. Instead of falling for FOMO, please take the time to analyse, research and evaluate each investing opportunity thoroughly and independently of the hype or noise of any individual or the crowd. There are no investment gurus and all that glitters is not gold! Or as Benjamin Graham famously said, “If everyone is thinking alike, then no one is thinking”.