Investment FOMO is very real. I’ve felt it. I’m sure you’ve felt it in some capacity.
Here’s how it typically works
- Potential Investor A: “Did you hear about [inset name]? She invested in [insert random investment] and made [insert absurd amount of $$$].
- Potential Investor B: “No way!”
- Potential Investor A: “Yeah! Anyway, I heard about [insert another similar investment]. Want to get in on it??”
- Potential Investor B: [Experiencing massive investment FOMO]
Ah yes. Haven’t we all had a conversation similar to this one? Or maybe it was more like this…
- Salesperson: “Hi [insert name of high income earner], I have an amazing investment opportunity for you that is guaranteed to give you a huge return. [Insert biased and maybe deceptive pitch.]
- Potential Investor: [Experiencing massive investment FOMO]
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But this is the big problem with investment FOMO inducing situations like this
In the first situation, what is being talked about is totally skewed by a retrospective bias.
Some investor may very well have hit out on an amazing return from some investment. But for every one of those investors, there are hundreds and thousands and more who struck out trying to hit on some angel-type investment, stock tip, or some other investment fad.
This is the same as hearing about someone winning the lottery and deciding you are going to “invest” in an obscene amount of lottery tickets. Not one of you reading this would think that is a good idea.
The second situation is much simpler but no less difficult to avoid
The allure of a shiny thing can be really hard to ignore. This is true in all of life but especially with investing.
We hear about a surefire idea or investment from someone, usually a salesperson masquerading as some sort of advisor. And we can’t resist. It’s too good to be true.
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Well, guess what? If that’s the case, it probably is.
The problem becomes that once we get hit with investment FOMO, it can be really hard to shake it off.
We as humans are very susceptible to group think. It’s caused us to do some pretty messed up things in our history. And that’s exactly what FOMO plays on.
The key to successful investing is avoiding investment FOMO
When you start investing and harnessing the power of compound interest responsibly, it’s exhilarating. There’s no other description. You may do this through index funds, cash flowing real estate or some other smart investment vehicle.
But then it can become a bit boring. And that’s a good thing. There’s so much other fun stuff to do in your life when you can relax about your finances knowing that you have a plan that will get you to financial freedom.
But instead this is often a dangerous time for an investor. Because it’s when you want to fiddle. And it’s when you are most prone to investment FOMO.
Here are 3 surefire ways to avoid investment FOMO
1. Have a bulletproof written personal finance and investing plan
I alluded to this above.
Create a financial plan that guides you to financial freedom. Basically, your plan sets out your financial goals and priorities and describes how you will reach them.
Once you have this in place, all you have to do is to follow the plan. And you know you will reach your goals. It’s a treasure map essentially.
And make sure to add in a bulletproof clause to your financial plan. State in writing that if you are thinking of adding a new investment to the plan, you need to wait 3 months before doing so.
A good investment will still be a good investment in 3 months. And if someone if pressuring you to act now, they don’t have you best interests. If it’s still good in 3 months, go ahead and add it in. Selenid and I did this when we first considered adding cash flowing real estate to our plan.
Now, with a bulletproof plan in place, when you next experience investment FOMO, just…
- Look at your financial plan
- Realize this new investment doesn’t fit in with your plan
- Remember that your plan is a treasure map to reach your financial goals
- Feel your FOMO fade away…
And remember, if you need help developing your personal financial plan, you can peruse my actual plan or check out my course that will help you do just that!
2. Ignore the noise
This is impossible to do 100%. But try your best.
As a high income earner, there will; always be people looking to transfer money from your pocket to theirs. Don’t get me wrong, there are good people out there looking to help. But there are also a lot of bad actors or just people who don’t know better themselves.
You should definitely ignore 100%:
- Cold calls or e-mails
- Opportunities presented randomly over social media
- Anything “guaranteed”
- Anything from anyone you just don’t feel comfortable with
So you really don’t need to do anything that deviates from this.
Keep it simple. If it’s too difficult for you to understand, it’s not a good investment.
Ignore the noise and follow the plan.
3. Don’t compare yourself to anyone else
This is really at the heart of all FOMO. Your life is a one person competition. It’s you and you against you only. That’s it.
If you are happy, you win.
So don’t base your journey, financial or otherwise, on anything but your own desires, happiness, fulfillment, and expectations.
For instance, I like all this finance stuff. I enjoy investing actively in real estate. I like side gigs like working on this blog.
But you may not want to do any of that! And that’s fine! The wonderful thing is that you don’t have to do any of it to reach financial freedom and live your life on your terms!
And that’s a great thing…
So don’t worry about the story of someone else’s path or the allure of altering your own if you don’t want to.
Just do whatever it takes to live your best life and don’t worry about the rest (again, I’m talking about financially and otherwise!)
And if you are looking to develop some of the (seriously) simple habits that I and others use to improve our financial well-being, this post is for you…or you can listen to other real life docs discussing these issues on the Doctors & Dollars podcast…
What do you think? Have you ever had investment FOMO? Did it help or hurt you? How do you avoid it? Let me know in the comments below!