FOMO = Fear Of Missing Out
One of the things you will have to struggle with as an investor is your conflicting emotions. Greed and hope, loss and gain, fear of missing out and fear of being in, the list goes on. Beneath this is a deep-rooted desire to make more money, be on every bull ride, and make the highest return possible in the market. But how feasible are these desires?
When we look at asset prices retrospectively, especially those on a bull ride we tend to see a continued rise in price alone. We don’t think about why it is rising, when will it stop rising, and even if it continues to rise, why we are buying it. FOMO is fundamentally responsible for this.
FOMO is what we have when we want to be on the bull ride of all assets and “fear of being in” is what we have when we don’t want to be in on a bear ride of an asset.
FOMO is real though and we need not deny it, we just have to know how to deal with it. In a recent podcast with Mark Cuban, he was asked the best way one could invest their money, say $15m, and his answer was of this nature:
“Put around $2m in an index fund and allow it to compound. That you do for safety and security in case all other things that you do turn on their head.”
The answer went on but I hope you got the gist. Everyone must give a priority to safety even if you have up to $15m.
So how can we better deal with FOMO?
First, ensure you have your safety net. Preferably, have that invested in a low cost and less volatile asset. Going by the advice of Mark Cuban, I will say an S&P 500 ETF. This should be where the larger percentage of your investment goes into. With this, you have peace of mind and little worries.
Once you have that covered, about 2 – 10% of your investable amount can be deployed into trending assets of the day. When it’s Tesla, get on it, and ride with it. When it’s Bitcoin, you join the wagon again.
That percentage is high enough to give you the feeling of being among (which is what we really seek plus the money) and low enough to ensure that if you lose a part of it or all of it, it won’t significantly affect your lifestyle.
Another thing you will have to deal with though is you raison d’etre; why you are participating in the bull ride. If you don’t settle on this one, you tend to always get your hands burnt. Are you in to make some quick 50% return or there to hold onto it forever or there to hold until it reaches its peak price? Whatever your “why” is, know it beforehand and follow through with it.
And that’s it. That’s how to better deal with FOMO.
What you should never do is bend to the will of FOMO by participating with a sum you cannot afford to lose. Example may include, a sum kept with you by someone else, or your school fees or your rent or any other kind of money of such nature. Beware.