In a world where social media fuels our desire for more, it’s no wonder that the Fear of Missing Out, or FOMO, is a common experience for many. While it’s normal to experience FOMO in various aspects of our lives, it can have detrimental effects on our financial well-being, particularly when it comes to investing.
But here comes JOMO, the “Joy of Missing Out,” a concept that promotes finding happiness in missing out on experiences that aren’t beneficial to us. And when we talk about investments, JOMO can be a saving grace that can help you avoid making hasty decisions that can lead to financial losses.
FOMO vs. JOMO: Understanding the Difference
FOMO is the feeling of anxiety that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on social media. This fear drives people to constantly check their social media feeds, make impulsive decisions, and say yes to everything to avoid the feeling of missing out.
In the realm of investing, FOMO might manifest as the fear of missing out on a profitable investment opportunity, causing one to make impulsive decisions based on hype and emotions rather than rational analysis.
On the other hand, JOMO is the emotion of satisfaction and the feeling of empowerment and control that comes from doing what’s best for you, regardless of what others are doing. In investments, JOMO is being content with not jumping on the bandwagon of the latest hot stock or investment trend, even if everyone else seems to be doing it.
The Influence of Social Media on Investment Decisions
Social media platforms like X (formerly Twitter), Instagram, and Facebook have a profound influence on investment behavior. From ‘influencers’ who share their investment tips and success stories to forums and groups dedicated to stock trading and cryptocurrencies, there is a vast amount of information available that can both help and hinder investors.
Seeing YouTubers and influencers post about their profitable investments and lavish lifestyles funded by their investment gains (yes, that Lamborghini) can lead to a sense of failure and the urge to replicate their success.
However, it is important to remember that people usually only share their success stories and rarely post about their losses or failed investments. This can create a skewed perception of reality, leading to unrealistic expectations and risky investment decisions fueled by FOMO.
The Impact of FOMO on Retail vs. Institutional Investors
FOMO can affect both retail and institutional investors, but the impact and the way they manage it can vary significantly.
Retail investors are individual investors who buy and sell securities for their personal accounts, and not for another company or organization. These investors are often more susceptible to FOMO as they may lack the experience, knowledge, or resources to thoroughly analyze investment opportunities.
The fear of missing out on a profitable investment can lead to impulsive decisions, such as buying stocks at a peak or investing in a volatile asset without fully understanding the risks involved.
Institutional investors, on the other hand, are organizations that invest on behalf of their members. They include pension funds, mutual funds, and insurance companies. These investors typically have more resources, experience, and sophisticated tools at their disposal to analyze investment opportunities. While they are not immune to FOMO, they are often better equipped to manage it and make more rational decisions.
Stay Away from FOMO
At Smart Finance Freedom, we believe in empowering our audience to make informed and rational investment decisions. Our non-professional advice is to stay away from FOMO. While it’s natural to feel bad for missing out, it’s important to remember that investing is a long-term goal. Making impulsive decisions based on emotions can lead to financial losses and big regrets.
Instead, focus on developing a well-thought-out investment strategy that aligns with your financial goals and risk tolerance. Be patient and stay disciplined, even when it seems like everyone else is making quick gains. Remember, the most successful investors are those who stay true to their strategy and don’t get swayed by the noise of the market. We’ve already published an article with 7 tips on how to avoid FOMO. Give it a read!
FOMO vs. JOMO: Final Thoughts
FOMO and JOMO are two opposing forces that can have a significant impact on your financial decisions. While social media can amplify feelings of FOMO and lead to impulsive investment decisions, embracing the concept of JOMO can empower you to make more rational and informed choices. Always stay true to your investment strategy and try to resist the urge to follow the herd. And yes, you can really find joy in missing out on bad investments.
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Disclaimer: This article is for informational purposes only and is not intended to be financial advice. Investing carries risks, and past performance is not indicative of future results. It’s always advisable to seek the guidance of a professional financial advisor before making investment decisions.