How to Avoid FOMO When Investing

FOMO road

With all this FOMO talk lately, you might mistake me for a millennial. FOMO! YOLO! See you at the Fyre Festival with all of my influencer friends! Or not.

I’m a Gen-Xer, which is more of a ROLO generation. Not an acronym; it’s just the yummy chocolate and caramel candy that was among the far fewer options back when I was growing up. You could find a roll next to the Whatchamacallits.

To be honest, I think of the rhyming acronyms as being popularized by the millennial generation, but the concept is nothing new. Investors have forever been concerned about missing out on the next hot stock. Stock tips are as old as the stock markets.

Reading Dr. Peter Kim’s post below conjured up an image of a kid in 1928, shining Joe Kennedy’s shoes, and telling him to buy Hindenburg. Joe famously said “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.”

Rather than acting on that “hot tip,” Joe resisted the FOMO and got out of stocks before the Great Depression hit. I’m not saying you should time the market, but I am saying it’s best to ignore both the pundits and the shoe shine boys when it comes to stock market prognostication.

This post was originally published on Passive Income MD.


How to Avoid FOMO When Investing


At some point in your investing career, you’ve likely heard of a stock that’s gone on a ridiculous run or a certain part of town that has now become the trendiest in the area, and you’ve kicked yourself for not investing. We’ve all been there.

Well, the cliche is true: hindsight is indeed 20/20. In hindsight, who wouldn’t have purchased as many shares as they could of Amazon or Apple back in the 1990s? Knowing what I know now, I would’ve also bought as many properties as possible in certain areas of Los Angeles 7-8 years ago.

However, we must realize that in investing as in life, capitalizing on every opportunity is simply impossible. Many times, we think about all the hypothetical returns we missed out on, which does nothing more for us than waste time. Worse, it creates this sense of FOMO (Fear OMissing Out) that may lead us to chase the next ever-elusive “hot” stock or investment trend with limited to disastrous results.


FOMO road


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Where Does FOMO Come From?


The concept of FOMO is partially associated with the social anxiety that results, in part, from watching the “highlights reel” of other people’s lives play out on social media. We all have those friends on Facebook or Instagram who seem to pack in an exotic vacation every other day. It’s hard not to feel like you’ve missed out on some similar experience.

But from an economic perspective, FOMO is a psychological phenomenon associated with loss aversion, particularly in terms of financial decision making. According to Huffington Post:

“In behavioral economics, and decision theory, the psychology behind FOMO can be partially explained by loss aversion. Amos Tversky and Daniel Kahneman demonstrated people’s strong tendency to want to avoid any losses. In fact, the research suggests that losses are twice as impactful on people, psychologically, as gains. This leads to risk aversion; we just hate to lose out on anything.”

Hating to lose out on anything can inadvertently lead to trying to get a stake in everything, increasing the risk of investing in hyped-up stocks and trends for fear of missing out on a potentially big payoff rather than for legitimate value.

We need to avoid this at all costs. Here are a few actionable steps to avoid acting purely due to the fear of missing out.


Start With the Goal in Mind


Every good sprinter knows that you keep your eyes on the finish line. You figure out where you want to be and reverse engineer things to get there. Think about the following, and use them to personalize a goal for yourself:

  • Where do you see yourself in 20 years? How about 10, and 5?
  • Do you plan on retiring early or do you plan on gradually retiring?
  • How much additional income are you looking for each month to fund the lifestyle you want?


Create a Basic Strategy to Meet Those Goals


Have you created a basic investment plan? If you’ve taken the White Coat Investor course, you’ll have one by the end of it. But in short, it details what your goals, strategy, allocation, and timeline should look like.

Personally, my strategy is focused on creating monthly passive income. All of our lives, we’re taught to think in terms of our monthly income, and we pay monthly expenses. Call me simple, but I think that if I make enough in monthly passive income to cover my monthly expenses, then that’s freedom to me. Of course, I also like to have some padding for changing life situations and unexpected events.

I decided to create that passive income through a combination of real estate (rental properties, syndications, funds, crowdfunding) and some businesses that produce residual income.



Be Wary of “Hot Tips.”


Make sure you always do your own due diligence. I used to follow the stock pickers on TV and on investment websites. I followed their portfolios diligently and made a lot of my buys based on their advice. I felt if I didn’t follow it, I would kick myself later. I just didn’t miss out. Well, that turned out consistently poorly for me. My father also followed hot tips from friends with often disastrous results. In fact, I lost over $100,000 on a hot stock tip.

Knowing how to decipher data and come up with the right conclusion before others do is a huge part of what successful investing is all about. Once information about a hot stock is online or on TV, let’s be honest, you’re the last person getting in–and that’s not where you want to be.

Similarly, investing in a “hot area” of town, after the price has had a significant run-up, is not the best time to come in on an investment. Better to always be on the early side if possible.

In any case, take all these so-called hot tips with a grain of salt, and do your own research.


Realize That You Never See the Full Picture of Other People’s Investments


You may hear from a friend that they crushed it with a certain investment. But you never know what happens next. You also don’t know what losses they’ve incurred in the past.

You may even see some of my results, like my crowdfunding results, and think you have to get in now to get the same results. Unfortunately, things never work like that. I don’t try to pretend you can duplicate my results exactly. You may do worse, or hopefully you’ll do much better. All I try to do is introduce different ways to invest and share my results.

Here’s what I tell people: let others’ successes and failures inspire and motivate you to learn more. Don’t just go chasing others’ results. If you’re interested in real estate, go and learn more. See if it’s a good fit. Figure out what works for you.


Focus on the Long-Term, Be Patient


Most serious investors know that investing for wealth is a marathon, not a sprint. You certainly won’t hear me talking about get-rich-quick schemes.

So I’ll stress this again and again: focus on the long term, not minute-to-minute. Doing the latter will drive you crazy. Plus, you probably don’t have the time to micro-manage every single investment.

Come to think of it, that’s one of the things I really like about real estate. It’s a long-term play for the most part (unless you’re trying to flip). I’m building wealth steadily as my tenants pay off the properties for me, and I receive cash flow on top of it.

When I invest in syndications and funds, I know it’s a long-term game and the expectation is that I’ll get consistent cash flow over that period. This mindset reduces my stress, helps me avoid serious FOMO, and also allows me to focus on other ventures.


Avoid FOMO, but Start Investing


Ultimately, you may not be able to build a time machine to take you back in time to purchase the stock that got away or that property that would’ve made you millions. But you can take steps in the present to help reach your long-term goals.

Invest in a way that makes sense for you and your goals and please, try your best to avoid FOMO.


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How do you overcome the fear of missing out on the next great investment? Do you occasionally swing for the fences? Or are you happy hitting singles again and again?

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4 thoughts on “How to Avoid FOMO When Investing”

  1. Look for difficulties and objectives that have individual importance to help with supporting interest after a while. Discover things that you’re hooked on and find out approaches to try them more. Have a good luck!

  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. Rolos and Whatchamacallits – you are speaking my language. Do you remember Zeros? They were only around for a short while back when us Gen X’rs were growing up.

    Every time I experience FOMO, I try to reframe it with JOMO (joy of missing out). It works most of the time.

    So I have an investing question. I’m a new investor and heavily invested in the paper asset class (low-cost index funds) and I’m eager to diversify. I’m not quite ready to get into real estate yet so can you recommend another way to diversify?

  4. >>Focus on the Long-Term, Be Patient

    I don’t understand why so many still don’t see the *simplicity* of long term stock investing in total market index funds. Easily doubling your money every 10 years with very little risk, and over 50+ years you have a good chance of getting some additional doubles.

    The risk of racing to find the hot stock is not worth it. You lose far more than you win.

  5. I think social media has created a bias as well which accentuates FOMO.

    Typically no one posts their failures/mistakes for the friends or general public to see. So as an audience with get an artificial view of their success thinking everything this person touches turns to gold which could not be further from the case.

    Couple that with people purposely creating facades of wealth (such as those Instagrammers who hire models, rent vehicles, planes, jewelery, etc just to get that perfect “Instagram shot,” which they can then plaster all over their social media. All in the name to get likes/followers.


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