- Date : 14/11/2023
- Read: 3 mins
FOMO is the new epidemic in investing and causing losses for many. Find out all about it and why it must be avoided.
What is FOMO?
FOMO (Fear of Missing Out) in finance is when you fear missing out on a profitable opportunity. If you are facing a FOMO, do not ignore its equally evil twin, MOMO. The Mystery of Missing Out (MOMO) is when you do not even know what you are going to miss but worry about it anyway.
The effect phenomenon like FOMO and MOMO is not limited to social media alone. They can adversely affect your financial decisions as well.
Fear of Missing Out (FOMO) started as a catchphrase in 2004, thanks to the anxiety caused by social media.
Oxford Dictionary included FOMO in 2013, and now it is a recognised psychological syndrome.
FOMO can be avoided by sticking to your long-term plan and strategy
Missing The Gravy Train
Let’s look at the multiple FOMO traps that are apparent in the stock price pattern of Adani Enterprises.
Adani Enterprise share price 1st week of November –
2021 – The share price crossed Rs 1,500
2022 – The share price approaches Rs 4,000
2023 – Presently trading at Rs 2,200
In July 2022, the share price was around 2,500, rising from Rs 350 in less than a year and a half. If your FOMO had gotten the better of you then you would be still waiting to recover the losses!
But if you knew how to deal with FOMO and did some fundamental analysis, you would have noticed that its debt-equity ratio doubled between 2021 and 2022. And perhaps you would have let your FOMO sober down.
FOMO Has Always Been Here
The stock market is overflowing with such abrupt and unexpected rallies followed by stagnation. As an investor, you must avoid mass hysteria over a stock or any financial instrument for that matter. Take Bitcoin for instance. For every Bitcoin millionaire, thousands did not know how to overcome FOMO and lost fortunes overnight.
Stalwarts like Warren Buffett warned us about FOMO even before the term FOMO gained significance. The Oracle of Omaha famously said, “Be fearful when others are greedy, and be greedy when others are fearful.” When it came to investing, successful investors like Buffett always gave precedence to analysis and research, rather than watching what others were doing.
FOMO can persuade you to carry out panic sales and impulsive purchases and deviate from their core investing strategies, committing big mistakes and losing money in the process. Therefore, you must steer clear of FOMO and disregard the impulses that rise out of it. Instead, go for proper due diligence and fundamental analysis of the investment you have shortlisted. If it fits your investment strategy and financial goals, go for it. If not, then give it a skip. You won’t be “missing out” on anything important.
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