Most people have heard of this acronym when it is linked to regular life situations. It refers to someone fearing missing out on an experience or doing something.
People definitely do not like to miss out on things that they might have enjoyed or would have been really successful and it is the same when it comes to stocks and trading.
It is also to identify how easy it is to even see something that we have missed out on in current society because it will be plastered across social media.
When looking at FOMO in stocks (see also ‘What Are Oversold Stocks?‘) it refers to someone who fears missing out on a stock that is fluctuating quite a lot and they do not want to miss out on a good investment or trading opportunity.
However, this can definitely be something negative for some people who feel this way because they can sometimes act irrational because of it, not focusing on the risks they might be taking because the success looks so good. But not everything is as it seems in stocks and trading.
Explaining FOMO Further In Stocks
When it comes to reading the markets they can fluctuate quite a lot sometimes and people do not want to miss out on the big opportunities to make some money.
It can be really frustrating if they feel as though they have missed their chance with it and others are finding success but not them.
This usually refers to new people in the market because they are looking to get started and they feel like every single opportunity is one to take a risk on.
This feeling can sometimes really cloud an individual’s judgment when it comes to their money and their investment where they can also forget to do their due diligence and it could end up turning sour.
This feeling of wanting to jump right in can stop you from looking at the strengths and weaknesses of the company. It is so important to do your research on any investment you make because taking too many risks without research can be quite damaging.
What people forget is that these fluctuations in the market can be very short lived and you would probably know this if you had done the research prior but if you do jump straight in that cloud of judgment can sometimes clear and you realize that this wasn’t the best investment.
This also outlines a lot about us as humans because we can choose greed over logic in these sorts of scenarios but it can be quite damaging for people investing money as they might lose more than ever expected.
Social Media’s Impact
In modern society, FOMO is across all areas of life and people experience it physically and emotionally with their thoughts and actions.
However, in relation to stocks, it can be more in your face now because it will be plastered across social media with advertisements and information everywhere.
It is difficult to avoid anything when it is constantly in your face and on your social media. The feeling of FOMO is really from you seeing other people succeed where you feel like you should have been succeeding too.
This is where you have to balance out the weight of the risk and the benefit and whether you are even in a position to make the investment.
How Can You Spot A FOMO In Stocks?
There are many different characteristics that you can spot in someone to recognise whether they struggle with FOMO in stocks.
For example, they will be greedy, have high expectations, jealous, indecisive, no analysis and many more.
Overall, they definitely struggle with confidence at times where they have no long term aspirations for their investments because they are just looking for that one stroke of luck and high expectation.
You will also find that they can be very indecisive because they are always thinking what if, instead of weighing the pros and cons and doing a proper analysis of the investment opportunity.
It is always important to have a management plan in place as well for when you are taking risks with investments. This will not be something that someone struggling with FOMO will be able to achieve.
What Can Enhance FOMO?
Even Though this part mostly refers to how the individual actually feels inside about making investments and their personal choices. There can also be aspects which can affect them and make the FOMO worse!
Market Volatility – When the market is very much up and fluctuates, this can cause someone who experiences FOMO to take action on their feeling because they feel as though there is a gap for their high expectations to become a reality.
However, this is most likely going to come out with losses because they have not carried out the correct due diligence.
Tips – other people that are in the same markets and investments as you also give tips on which ones they feel is going to be really successful and increase.
However, people can act on these tips way too fast and without any thought which is dangerous for the investment success rate. You always need to do your analysis and research regardless of any external information.
Constant losses – when someone is on a constant losing streak, it can definitely make them act out in ways of frustration. It may also make you feel like you need some success and the only way to do that is to make changes without that further analysis.
Overall, this can be a real problem for people who struggle with keeping themselves calm and collected in volatile times in stocks.
FOMO is something real that people genuinely struggle with and if you are someone who does, then always remember that the person who does the extensive analysis will always get the best investment because they know what the future holds for them.