How to Beat FOMO in The Stock Market | 4 Key Points

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How to beat FOMO… this has been a question that many of us, as investors, might be currently pondering. In case you don’t know what FOMO it simply means “Fear Of Missing Out.” As many of us already know, as of the time of writing this article (1/29/2021), there has been some incredible growth and volatility from two particular stocks (among others), GameStop (GME) and AMC (same ticker symbol).

The reason for these growth bursts is a whole different story of its own, involving a battle between Reddit retail traders versus hedge funds, particularly Melvin Capital and Citron.

To summarize this story, the growth of these stocks was not due to the fundamentals of the companies, but rather the market itself. In other words, they are completely over-valued.

This tremendous spike in price has brought a lot of attention to these stocks from mainstream media and common people, many of whom are unfamiliar with investing overall. It has also gotten a lot of investors thinking, “should I buy in”? Due to the tremendous amount of FOMO currently circulating the market.

Many of these investors are struggling to deal with FOMO as they see those around them buying into these over-priced stocks, all in the name of making a quick buck and “making hedge funds pay.”

Unfortunately, when involved in situations like these, more people end up losing money than actually making the money they’re trying to make.

In order to avoid being part of the majority in this situation, you either have to be VERY lucky, or you have to beat the FOMO and stick to your strategy.

In this article, I have outlined four important key points to help you maintain your course on your wealth-building journey.

Patience

The biggest key to investing is PATIENCE. You have a strategy, stick to it, and be patient.

You bought your stocks below their intrinsic value. Great! Now be patient. You’ve made the calculations, and you know their price will go up to meet their intrinsic value. You know that you’ve invested in intrinsic gold, so why are you stressing over stocks with no intrinsic value?

This also goes for passive investors investing in index funds or mutual funds. Stick to your long-term investing strategy, you’ll thank yourself in the end.

Sure, it’s nice to make some quick bucks, but quick bucks don’t normally produce long-term wealth, it’s an uncommon phenomenon.

However, if you’d like to make some extra cash by trading on the side, keep in mind that plenty of other opportunities will present themselves later, you won’t be able to take advantage of all of them but the best way to take advantage of them would be to be in them BEFORE the hype, not during.

At this point, you’re more than likely too late to join, and this booming stock may have no other choice but to go back down to meet its true value.

Knowledge

Having the fundamental knowledge of what you’re invested in provides you with comfort in knowing that it was the right move, despite what the outside media sources are yelling about. Having the right knowledge will answer whether buying into what everyone else is buying lines up with your investment plan.

If it doesn’t, don’t buy it. If it does, and you can somehow make it work, great! But the knowledge is there, you’re not making this purchase emotionally, but rather logically, after effectively weighing all your options.

Knowledge is power, and this statement sometimes is taken much too lightly. Know your plan, know what you’re investing in, and know how much risk you’re willing to put yourself into by buying risky assets.

With all this knowledge, you will be able to form an executive plan of action. If the knowledge isn’t there, your safest (and probably smartest) option is to stay away from the unknown.

Emotional Discipline

When you feel the FOMO, you immediately start to think emotionally, not logically. But remember, you have a plan, stick to it. Don’t make unwise decision based on emotions. During FOMO, they will kick in, and they will kick in HARD.

Emotional discipline is required so that you can avoid making stupid decision.

Don’t sell or buy because it FEELS right, or just because everyone else is doing it. Maintain your discipline to your original plan.

Take a step back, breathe, weigh your options, weigh the risks. Don’t make decisions that you’ll end up regretting. Many people take on these big risks and end up with very negative outcomes. Don’t be one of them.

Buying a lucky hot stock and hoping it grows is the equivalent of buying lottery ticket and hoping you win. It’s all based on luck, just because it happens to some, it doesn’t mean it will happen to you.

Follow A Plan

Although this has been emphasized many time throughout this article, something that hasn’t been said is this: if you start out with an investment plan/strategy, you won’t be as tempted to jump into random gambles when they arise.

Once you have formulated a blueprint, the odds that you jump into something riskier than your current plan will be much lower. This doesn’t guarantee that you’ll never be tempted to jump into the gambles, it just gives you an alternative to look at instead.

At this point, you’ve constructed a plan that’s predicated on fundamental knowledge. Follow your plan, don’t change the course just because everyone else is doing it. You know your course and you’ve planned for this. Stick to the plan and stay disciplined!

Your future, long-term wealth depends on it.

Conclusion

As investors, we know how to value a stock, and we know that these high prices are very unlikely to continue this way in the long run. Thus, we should avoid buying in because we don’t want to take on massive speculative risk. Those who are able to get rich quickly from events like these are VERY lucky, but the majority of people end in tears.

If you’d like to take advantage of these types of opportunities, do it with money that you’re okay with losing. If you make gains, great! If you don’t, at least you didn’t lose a substantial portion of your wealth.

You’re gambling with money and the chances of prices moving up are just as likely as they are to go down. Don’t put yourself in a hole you can’t get out of.

The purpose of this article is help people avoid extreme losses and regrets that commonly occur in situations like these.

Have you made money from this situation? Have you lost money? Let me know in the comment section below, it’ll be interesting to read your guys’s experiences with this GME and AMC ordeal.

 


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26 Comments

  1. Hi Misael, 

    Wonderful explanation about FOMO. We all are guilty of this. In fact, the worst case is when we buy and then the price falls. And then we start averaging. It’s a spiral as prices keep falling further. Th4e more you buy, the more of a soup you are in. 

    I think your article has done a great job of warning us about the perils of FOMO. 

    Thank u 

    Regards,

    Aps

    1. Thank you for your feedback 🙂

  2. Good day

    Thank you for such a wonderful article. Your article addresses the problem that I have been facing since I started my journey to building wealth through the internet. FOMO has made a lot us us loose money over and over again.

    You are very right, quick bucks do not normal produce long term wealth. Sticking to a strategy that you have tried and tested and found it to be working is the way to go.

    Whether you are buying stock or trading, emotional buying or selling never brings good results. Not following a strategy is indeed the same as gambling.

    Once again, thank you for such important information. I have learnt so much today

    1. I’m glad this has been helpful article for you. Share it with your friends if you would like!

  3. I have never heard about the expression FOMO. But I have read a lot about the fear of lost missing out. It reminds me of something that Robert Kiyosaki have said almost 20 years ago. Financial education is the best remedy against fear. This is why I think you are right when you say that you have to stick with your plan and focus on a long term strategy. Good article, Misael.

    1. Yessir! Thank you 🙂

  4. I think a lot of people could benefit from reading this. I heard someone once say there were two factors that kept wallstreet running, Fear and greed. and fear of missing out probably motivates at least of all trades wither it’s selling or buying. Needing to handle the stress and pressure and not make rash decisions is what’s makes some people successful and what destroys others.

    1. Absolutely, FOMO makes those who wait more successful than those who FOMO into the market, generally speaking of course 

  5. Nice article you have here, I am unlucky to say that I have been in investing before and I could not control my FOMO and I nearly lost everything, thank you for writing an article about this so that future and beginner investors may find it and not stumble or fall in the same hole that I did.

    1. I’m glad that you didn’t lose it all, and I’m happy to hear this was helpful. thank you for your feedback 🙂

  6. I myself am not an investor of any kind, I don’t mess around with stocks, forex trading, or anything like that, but this does seem to be some valuable information for anyone who does. However, I feel like these four points can be applied to a lot of different things and not just investing. I’ve seen people rushing to make a decision when it comes to a big move for a job even though they haven’t been with the job long enough to see if it will work out for them or not. I think it’s definitely a good idea to keep these four points in mind during out everyday lives, as well as for those who like to invest their money.

    1. Very interesting observation! Thank you for the feedback on that! It is definitely applicable to other situations for sure

  7. Thank you very much for a very informative article. As an investor, you have to make some life-changing decisions. knowledge is power, know your product well before you invest or do no invest. Do not make a decision based on your emotions. You should make a plan and stick to it.

    1. 100% correct, my friend. Thank you for your comment

  8. Thank you very much for sharing the ways to beat FOMO. As a newbie in stock investment, I always try to follow the market trend. When most of my friends tend to buy a new stock, I also follow them because I don’t have that knowledge if it’s really a good decision or not. One thing that I may need help with is emotional discipline. I’m not sure that I can make a good decision by just ‘breath in, breath out’. Any tips to train emotional discipline better?

    1. Thank you for your feedback and your question 🙂 I think that the first step to knowing how to cope with it is to first identify your triggers. Know what causes those emotions and find ways to anticipate them. If you see them coming, it’ll be much easier to maintain emotional discipline than if they hit you by surprise. 

      Next, I would step back and look at the bigger picture. For example, why did I make this plan in the first place? Why should I stick to it? Although right now things look cool, why should I maintain my course and ignore the noise? Answer these questions for yourself. They will help you act logically, rather than emotionally.

      Again, great question! Thanks for asking!

  9. Hello there, Misael! These are definitely great tips you provided. I have been paying some attention to GME and AMC in the past few weeks when it was skyrocketing. I think definitely being patient like you mentioned was what saved me from giving in to FOMO this time around. I had a bad experience with Kodak a while back where it skyrocketed too. Fortunately for me I didn’t spend too much on it so I also didn’t lose too much either. I have heard of some individuals who lost so much and bought at the expensive price and then people started selling which caused the price to crash down. After witnessing that, I kind of strayed away from GME and AMC this time around despite the popularity. I also had anticipated that some stock market platforms might crash which could create delays or issues with logging in. I definitely lucked out again there. FOMO is definitely something to try and not give in to. 

    1. 100% agree with you. I’m glad that you didn’t give in. Also, I’m glad that you didn’t lose too much with Kodak in the past! Better to lose what you can afford to lose than to lose it all! 

      Several people (aside from hedge fund managers) have lost a lot of money from going into these stocks. My goal with this article was to save people from jumping into this and losing money. Thank you for your feedback

  10. Ahh, what a great piece on how to invest in the stock market! While day trading is fun (and it might even give you a little bit to toss into a long term investment strategy), there is no substitute for doing your homework, having a plan and being patient.  Your points on this subject are spot on and I can speak to that from a professional standpoint.  Please keep up the good work in helping people be informed about investments!

    1. Absolutely! And thank you for your feedback and for browsing around the site!

  11. I think you hit the nail on the head in this article. Most people don’t have the patience to wait and end up selling off their shares way too soon, instead of looking at the investment as long term.

    My financial advisor always tells me it is a waiting game, and the worst time to sell is when the economy is doing badly, depending on what you are invested in.

    Knowledge is power, but sometimes it is luck as well. Would you advise going for shares in a particular company or solid investments like an all-round portfolio?

    1. Yes! I definitely agree with your advisor! 

      And while I can’t particularly give investment advice, I can definitely share my knowledge and personal experience to answer your question. Based on personal experience, it depends on the type of investor you are

      If you’re a passive investor, then diversifying your investment portfolio is the best option.

      If you’re an active investor who can allocate time to researching the market and individual stocks, then you should have the fundamental knowledge of what investments are the best to meet your goals.

      Thank you for the question!

  12. Hi there, As investor, you need to review your needs, goals and take the time to think about what you really want from your investment.

    Consider how long you want to invest your money and make an investment plan.

    If you want to avoid risk or FOMO, spread your money across a range of different investment types.

    Positive attitude is really important in this business. Keeping a positive attitude is one of the most important things you can do if you want to become a successful investor and want to achieve your desired level of success.

    1. Yes indeed! Thank you for your input!

  13. I feel that unfortunately unless we are a very rigorous trader with great emotional control, we are going to have FOMO. I would even say that we can all get FOMO under certain circumstances. The problem is not having it, it is identifying it and working on controlling it.

    Thank you very much for this interesting read.

    1. Traders and investors both can be victims to it. But like you said, it’s important to know when it’s getting you so that you can control it!

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