“We have worked hard for years, and we bring out a product which is fastest, best, easiest, highly profitable and MOST AMAZING product available only for this Week.”
“Over 5000 members have already ENROLLED, and we don’t you to miss out on the exclusive once in a lifetime opportunity, and so we are extending for a Week.”
“This Stock Market Software is a game changer in our industry valued at Rs. 49999.00, and only for a Week, we are Offering at Rs. 3999.00.
“Sign up IMMEDIATELY to be a part of the most revolutionary program ever.”
The above are the examples of FOMO.
Most widely used Marketing Tactic which even today doesn’t fail you.
In stock market this is complex. When you listen to people around you such as research analysts, broker, friends, relative, research reports, tipsters; that someone is making a profit you ended up doing FOMO to yourself.
FOMO -Fear Of Missing Out
- 1 Fear Of Missing Out (FOMO)
Fear Of Missing Out (FOMO)
FOMO is a more social psychology than anything else in Investing parlance. When we talk marketing cause is a predetermined and well-motivated one, and the effect is your end up emptying your pocket.
FOMO in Investing;”[Y]ou are the cause and you the effect.”
Before Getting down to More Detail into this Topic would revisit this elaborately so that you don’t miss out on the Finer points.
What is Fear of Missing Out (FOMO)?
Stock Market is governed by two things, the most important, especially in the psychological parlance;” Greed & Fear.”
It’s not without reason that the following was quoted.
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
― Warren Buffett
FOMO – Deals with Fear Part of the Quote.
Henkka Hyppönen had conducted an extensive Research and written a Book named WHY WE FEAR you won’t find this book on Amazon or Flipkart. I have taken a screenshot of the synopsis of their detailed research below:
Hope you would be able to relate when it comes to Investing.
The best example of the Recent times in Bitcoin. Right from the beginning of the year Bitcoin is rising ever since the start of the year 2017. Every time it falls and regains there are few people who fear left out and join the bandwagon. Ironically on a tepid note, this is a Currency, Technology and Not an Investment (Correct me if I am Wrong).
Words You Should Know 2013: The 201 Words from Science, Politics, Technology … By Nicole Cammorata, “[Cl]early pointed out that the fear of missing out, as a social concept, is not a new idea, but with a massive increase in social media site.”.
The New York Times mentioned in their story in the year 2011 when a person feels the need to check Facebook, Orkut, Twitter, Snapchat, FourSquare, Instagram, or any other social media site for that matter to see what others are doing and check their feedback(Likes, Comments, Reactions, etc.).
Jacob Burak in his book, How to Find a Black Cat in a Dark Room (especially when there is no cat): The Psychology of Intuition, Influence, Decision Making and Trust mentioned, “[S]uprisingly those who work in Investment are more prone to this.
Fear of Missing Out: An Investor’s Worst Rival
Research has stated that ” Fear of Missing Out makes investors Blind”; which leads to making decisions that shouldn’t be taken. It not only ruins the best of Investing strategy but sabotages your money and finances.
What leads to the Fear of Missing Out varies from person to person.
The primary thing what the fear of missing out does is it merely pulls a curtain to your ability to thinking, and you start taking a decision based on emotions.
Like all when I started saving money it was with a saving bank account. The saving bank account could give anything around 5%-6% as long as I was earning 5% month on a month I never looked into my account as the return was not crucial to me.
After few months when I heard that Recurring Deposit give much better return I am immediately was tempted to shift to recurring deposit. Now, this is a never-ending chain which had started next came the Mutual Fund which is giving an average return of 18%, other products such as PMS (Portfolio Management Services) giving you 24% returns and then Derivative Portfolio Management Service giving you whooping 40% return and the list goes on.
Importantly never let a curtain come in your way of investing. We are not in a race. You are very comfortable with Mutual Fund Investing or Index Funding Investing you should stop with that. Investing when you are not comfortable or unknown territory should be a caution to yourself.
Why is Fear of Missing Out Afraid of the Truth?
Capacity to accept the truth is blindfolded by Fear of Missing Out. The answer to your question is.
You should be looking out for triggers. Everyone has their own set of triggers when it comes to FOMO. If you can successfully find what your triggers are you can stop them.
The origin of these triggers could be from anywhere. These triggers most of the time tell an investor, that he is not performing well. Instead of accepting the truth and working on it most of us start fighting with the truth. One as an investor just has to realize that he cannot be at the top of everyone all the time.
How to Cheat at Fear of Missing Out(FOMO) and Get Away with It
The most common reason for the Triggers is a comparison. You cannot compare the wrong things or unrelated things and make decisions.
Once you have stopped comparing and started focusing on your area of expertise you automatically ensure that fear of missing out no longer effects you.
Award-winning psychologist Lucy Jo Palladino offers practical solutions for anyone juggling too much, who finds themselves in a state of ‘continuous partial attention’, seemingly unable to do any one task with full concentration. In order to help people combat the negative aspects of ‘always-on’ information culture, Palladino has come up with a new set of skills that will help readers beat distraction and win the fight against information overload.
Focusing on your area of expertise is the core of Three Pillars of Value Investing.
How to Fear of Missing Out Never Comes Your Way
This has already been emphasized on Pillars of Value Investing that one should always focus on Core Competencies.
This the most important aspect of value investing to stay put in the circle of competence. You would have gained expertise and knowledge in specific sector and industries. You just have to stick to those. You would broaden your knowledge horizon as you read but when it comes to picking up opportunities in the stock market, you should only consider opportunities in which you have expertise.
One can always raise their circle of competencies. The confidence you get in right circle of competence helps you take better and stronger decision.
Some Poplar Saying on Circle of Competence
“If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter”
“It makes sense that if you limit your investments to those situations where you are knowledgeable and confident and only those situations, your success rate will be very high.”
– Joel Greenblatt
“Dealing in a circle of competence, dealing with companies that you have the ability to understand, being able to come up with a good analysis of a company’s value and earning power, is fundamental.”
– Lou Simpson
“Most businesses that I look at are typically rejected within two or three minutes or even less. They are rejected in two or three minutes for one of two reasons – they are either outside the circle of competence or the quick look at the price, market cap and such doesn’t make it interesting. They either are things that I don’t understand or they are things that don’t seem to be cheap by any measure that I would have an interest in.”
“It’s not how big your circle of competence is – it’s more about how well you know the stuff in your circle”
– Mohnish Pabrai
You may firmly believe that you would not be a victim of Fear Of Missing Out, only till you are happy with your results.
Having a look at the triggers and staying in your circle of competence will only make you realize how better your investment can get.
Understanding and Increasing your circle of competence are only scratching the surface.
I’ve given you two actionable changes in your investment strategy and returns. Henceforth, don’t be and don’t allow anyone to be a victim of Fear of Missing Out.
And when you do, come back here and let me know what the results are! I’ll be waiting for you in the comments!
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