FOMO was recently added to the Oxford Dictionary. It is “Fear Of Missing Out” It can manifest in two harmful ways.
- You really did miss out and feel angst because of that. That leads to fear of future misses.
- You avoided it by participating in everything and ended up losing time, money or both on many of the activities.
People are highly motivated by fear, whatever its source. Even irrational fears are acted upon. Reason should be your guide.
We must notice that we can’t do everything. So it is near certain something we did not do will turn out well and we will kick ourselves for not doing it. Not a problem. Hear investment manager, Peter Lynch, “You don’t lose anything by not owning a successful stock, even if it’s a ten-bagger”
Not winning is different from losing, yet emotionally we treat them equally. Thus a conflict. The question becomes should you let that conflict influence future decisions?
It won’t get better if you do participate in everything you discover. The outcomes of opportunities are more or less normally distributed. If you participate in everything, you will have some big winners, some average winners and some losers. Even big losers. Your regret here will be that you should have put more money in the winners and none in the losers. No win emotionally.
There is a simple solution.
“Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” Will Rogers
Instead, consider the value of no. Buffett claims that rich people say no to almost everything. Poker players know that to fold is, at worst, a small mistake. You should keep track of everything that they consider not just what you do. Usually you will find that saying no was the right thing to do far more often than it was the wrong thing. Learn from mistakes.
The yes aspect has options too. You won’t always be right, but you do not have to stay involved forever. If a security moves against you and you can see the error in your first decision, quit gracefully and see if you can avoid your mistake in future. Sometimes it is the market as a whole. Sometimes your stock or industry is out of favour.
You can understand the value of a stock but that is not enough. Always remember that the market is a pricing mechanism. It says little about value. You can lose even when you are right.
We are all loss averse. Kahneman and Taversky added greatly to our wisdom in this regard, but it was very old knowledge. Tacitus lived almost 2,000 years ago. “The desire for safety stands against every great and noble enterprise.”
Fear, no matter its source, is a poor investment counselor.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772