One of the worst investment strategies you can ever take on is the FOMO approach. The Fear of Missing Out! People have lost huge sums of money as a result of wanting to jump on the latest financial bandwagon.
The problem with FOMO investing is that it can lead you to make poor investment decisions. Investment decisions should generally be driven by 3 main factors:
- Your desired return
- Your tolerance for the possibility of losing your money (risk appetite)
- The amount of time you’re willing to invest your money
Investments that are not evaluated according to this criteria could be FOMO investments. So how do you ensure that you don’t fall prey to FOMO? Lookout for these 5 signs:
1 – Your main reason for investing is because of the profits you heard your friend was making.
This is the main sign of the FOMO investor. The FOMO investor is overtaken by greed and envy. Investing because of what you’ve seen other people making opens you up to all kinds of losses. You become susceptible to scams of every kind. You jump into investments without thinking things through.
2 – You don’t understand the value of what you’re investing in
Cryptocurrency and forex trading are the main culprits here. FOMO investors pile into these markets hoping to make large returns overnight. The trouble with investing in something you don’t understand is that you never understand how much you could lose. When investing in anything, make sure you understand what drives its value and its price.
3 – You expect ridiculous investment returns
Every investor expects to earn a decent return on their investments. FOMO investors tend to go the extra mile and expect very high investment returns. If you’re investing to triple your money in a month, then you’re a definite FOMO investor. Be careful of people or investments that promise excessive returns.
4– You underestimate the possibility of losses
The thing about high returns is that they come with high risks. This is a fundamental investment rule. FOMO investors tend to focus only on how much they could make and not how much they could lose. A good rule of investing is knowing and being comfortable with the possible losses.
5 – The most research you’ve done is reading social media posts
Sustainable investing is a long game that requires research, discipline, and patience. Relying on what you’ve read on social media as the sum total of your research is a sure way to failure.
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