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The term "FOMO " is defined as "a state of mental or emotional tension cused by the fear of missing something. "It is also a form of social anxiety - a compulsive worry that one might miss a satisfying opportunity or event, often prompted by the posts seen on the sites social media.
While it is natural for people to experience FOMO, such anxiety can lead us to make bad decisions.
Judgment does not should not be clouded by the desire to fit in or the fear of being excluded from pleasure. This is especially true when it comes to our hard earned money. It is not because your friends and neighbors invest in a certain stock or asset class that is a suitable investment for you.
Often times if something sounds too good to be true it probably is .
This is why it is important to slow down, seek out that investment opportunity that everyone is talking about and consider its impact.long term on your financial well-being and your goals.
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Those who are new to investing and / or have suddenly acquired significant wealth may be particularly vulnerable to letting FOMO overtake them when they hear about advice or 'Interesting investment opportunities.
How would they know better? Like any other skill, investing takes time to master.Therefore, most investors could benefit from experts they trust to develop and implement an appropriate investment strategy that reflects their goals and values.
Guide investor clients to Through periods of stock market volatility illustrated how "successful " investing is determined by time spent in the market, and not by the timing of the market.
As said the saying goes, "don't put all your eggs in one basket ". take a gradual and broad approach. At this point, it's not smart to invest your entire stimulus check or year-end bonus in just one company you've read, that'll be the next big thing.
Of course, you could buy shares of this company if you can afford to lose every penny, but we recommend that you start simple and get a lot of exposure to the marche through, for example, passive index funds, so that you can learn how the market works.
After feeling the highs of your potential returns on investment and the lows of loss of money money, you might be ready to take on more focused or complex investments.
To help appease FOMO trends, you may want to consider engaging a trusted financial advisor who can work with you to develop a financial plan that prioritizes your goals and values. To that end, an effective plan will put in place safeguards to ensure you stay on track to maintain your financial well-being and independence.
If a particular investment or other potential decision doesn't fit within the parameters of your financial plan, you will find yourself ignoring them or dismissing them more confidently as distractions, rather than being afraid to move onnext.
This doesn't mean that your financial plan should be static.
On the contrary, it should be agile and dynamic enough to react appropriately to any change in your situation overall financial, goals or values. This trusted advisor can act as your sounding board in determining whether a change in your plan is warranted or not, or whether you are trying to cover up future bad decisions caused by FOMO.
You also need to do this. be careful to borrow money to invest. Many financial institutions will lend money to investors so that they can buy stocks they are eager to invest in - and online platforms have made the process easier than ever. But borrowing money at historically low rates to buy shares of a stock that hopefully never goes down in price is often too good to be.be true.
If you accept a margin loan to buy a stock of a stock while the stock price drops, you must either invest more money to maintain your level of collateral, or sell part of your investments to repay your loan. Although
It is also important to note that complex investments and strategies are not necessarily better than their simpler counterparts. Don't be fooled by grandiose and sophisticated terms and deions.
A complicated investment is not a better alternative to the more common ones you are used to, just because it is more difficult to understand or attract people who profess a greater sense of investing. In fact, it is a good practiceto avoid investments that you cannot easily understand. Often times, such investments are complex due to the added risk.
When considering a more complex investment, you must ask yourself, "Can it be done more simply?" Very often, it is possible - and with lower fees.
But too often investors hesitate to believe that because they do not want to miss out on an investment that everyone is talking about, or that they assume that more sophisticated investments are better for their portfolios.
As advisors, we have found that explaining the pros and cons of sophisticated investments , such as complex option strategies, to clients at times helped them see things more clearly. He also reminded them that basic financial principles like getting started and keeping it simple - and not rushing into things.Fashionable or complicated investments - are a smart strategy.
Just like in social environments, trend and sophistication don't necessarily make people or businesses better. The same goes for investing.
If you decide to work with an advisor, choose one who is a steadfast partner to guide you through the investment process and you remind to avoid FOMO-led decisions.