No one likes to feel like they are missing out on a good thing.
Our brains are constantly comparing our reality to our expectations or goals, and when that doesn’t line up, it can get uncomfortable. The fear of missing out ‘FOMO’ distorts this process by making it hard to see situations accurately – which creates doubt and can push you to follow the lead of others for that ‘goal’. We see this in financial matters where motivation not to be ‘left behind’ can translate into chasing investment trends.[i]
While feeling FOMO is pretty common, letting it guide your financial decisions is more harmful than letting it dictate the next new restaurant you try, or which film is must-see.
We know that markets work independently, and that swings are inevitable no matter how trendy a product or stock is. Yet often the kind of opportunities inspiring FOMO feelings are hugely volatile investments.
Furthermore, investing in anything just so you don’t miss the hype is a sure-fire way to lose money. Folks end up buying stocks when demand has soared and prices are high, only to panic and sell them for much less when they crash. The fear of missing out becomes fear of losing it all, and unfortunately, it can be devastating for many when these crashes happen.
Add to that the advent of meme stocks (think Gamestop in 2020). This is when people use platforms like Reddit to coordinate artificially inflating the demand for, and value of, a company’s stocks. While this has created an upswing for some companies in the short term, it also focuses heavily on only choosing specific companies. As with any stock picking, this is essentially a gamble that investors can outwit the market.[ii]
People seem less inclined to covet tried-and-true investing strategies. Perhaps because good investing is inherently boring and involves accepting that we cannot control nor predict the movement of markets – but we can use our knowledge of volatility to invest globally in a diversified portfolio, making sure our proverbial eggs are never sitting in one basket.
What’s scarier; fear of missing out on a short-term investment, or actually missing out on being financially secure in future? If you have financial goals to support yourself and your family, why risk success on something as fleeting and unproven as a FOMO investment?
Some things you might not want to miss out on, which will help you in the long run…
Making a plan: This is your most important step. Your plan might adapt due to life’s changes, but you should know where you want to be and how you are planning to get there.
Down-paying debt: Any higher-interest debt like credit cards should be paid back as soon as you can. The interest rates will outweigh any annual investment returns – so if you don’t prioritise paying this down, you’re not really creating a net gain of funds you can rely on.
Take advantage of ‘free money’: KiwiSaver, for example. If you can hit the minimum contribution threshold of $1042 each year, the Government will match it with $521. No other caveats. It’s an easy way to bump up your total, which will mean better returns over time.
Getting advice from the right people is invaluable when working on your financial plan. For example, Serena Williams is an absolute force on the tennis court. In her profession, she is an expert. That doesn’t mean you should trust her opinion on investments. She was one of a lineup of celebrities sued for promoting the Bored Ape Yacht Club NFTs, which saw many of the influenced investors sustain substantial losses.[iii]
A trusted, local fiduciary can help you navigate on your financial journey. They have the expertise, qualifications, and your best interest at heart. Financial advice from the professionals, tailored to your unique situation, is always going to be better than crowd-sourcing your next move.
by Nick Stewart (CEO and Financial Adviser at Stewart Group)
· Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 327.
· The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
[i] https://www.psychiatrictimes.com/view/understanding-the-fear-of-missing-out
[ii] https://www.investopedia.com/meme-stock-5206762
[iii] https://www.sportspromedia.com/news/bored-ape-yacht-club-class-action-lawsuit/?zephr_sso_ott=9utEzm
