Got financial FOMO? Here’s how to let it go

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When I was about 10 or 11 years old, a friend introduced me to the wonders of online video games, most notably 2001 multiplayer RPG classic RuneScape. I was immediately hooked on the low-poly graphics and quest-based gameplay, but as I was limited to just 45 minutes a day on the family computer, my efforts to endlessly play and level up my character were severely stymied.

As you can imagine, this didn’t sit well with young Dom, whose friends were allowed seemingly unfettered access to the game. I found myself falling victim to the dreaded FOMO, or the fear of missing out.

When others are benefiting from their investments it can be easy to want in.Credit: Michael Howard

FOMO affects all of us and in many scenarios. We feel it at work, at home and in social situations, and it’s something psychologists believe has worsened over time in society thanks to the invention of the internet and social media. A study from 2019 showed that a whopping 75 per cent of young adults regularly suffer from FOMO.

What’s the problem?

Unsurprisingly, FOMO is prominent in the world of money and investing, often coming to the fore when investors are attempting to jump on the next hot stock before it crashes.

It can also appear in more subtle ways, like driving you to buy a new pair of shoes you can’t really afford, just so you look trendy. And while keeping up with the Joneses can feel satisfying at the time, it can be seriously detrimental to your financial wellbeing.

What you can do about it

Here are some tips to help combat FOMO:

• Why do we experience FOMO when dealing with money? Investing is both a highly emotional yet rational undertaking, but it’s the former that tends to win out, especially for younger or less experienced investors. Deline Jacovides, a financial planner at Mazi Wealth, says FOMO can come about simply when you see others benefiting – like making a lot of money on some up-and-coming stock – while you’re not. “Social media, news headlines, and even conversations with friends can amplify this feeling,” she says. “When this happens, we see people focusing on short-term gains rather than long-term fundamentals or strategy.” Investors can also fall victim to herd mentality, where they assume if others are making a particular investment, it must be a good decision, which can further amplify FOMO and prompt bad decisions.

• When is FOMO at its worst? When markets are calm, FOMO tends not to be as much of an issue for investors, as there’s not much to feel like you’re missing out on. But once things start to heat up FOMO can rear its head, particularly when markets are feeling positive, according to Jon Howie, chief executive of online investing platform Stake. “FOMO is usually at its worst when optimism is irrationally positive and investors are underestimating risk, whether that’s in a specific stock, industry or asset class,” he says. “Events like elections, significant technology innovations, or geopolitical shifts can spur market swings and emotionally urge people to invest. While you are likely to hear stories of people winning big on a particular stock or cryptocurrency, it’s important to remind yourself that this is extremely rare, and usually involves extreme risk.”
• How do you combat FOMO? Unfortunately, FOMO is one of those things we all just have to deal with, so completely defeating it is unlikely to be possible, shy of shedding all earthly possessions and going to live in a remote monastery. But if that doesn’t appeal, Howie suggests constructing a FOMO-resistant investment portfolio built around exchange-traded funds and supplemented with well-researched individual stocks, and investing a small amount each month, so reducing choice paralysis and limiting short-term decision-making. Similarly, Jacovides advises having a clear investment strategy and sticking to it, along with limiting your social media exposure. She also recommends taking a beat before making impulsive decisions. “If you’re feeling the urge to invest just because others are, take a step back and reassess,” she says. “Find something else to focus your energy on, such as exercise.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.