The world of investing can generate many emotions - from the highs of watching your returns skyrocket, to the lows of miscalculating something and watching them depreciate or plummet. What a rollercoaster.
In mid-2020, investment blogger Ben Carlson wrote an article about two major types of fear in investing: “FOMO” - the fear of missing out, and “FOBI” - the fear of being in. A pertinent topic for anyone investing in 2020 who will have felt both of these when COVID-19 made share prices plummet in March, followed by the roar of their resurgence later in the year.
FOMO in investing can come from any number of factors - the worry that everyone is doing it, so you should too (Game Stop, anyone?), the desire for your children to have more than you did growing up, wanting to get out of the rat race whilst you still have time to enjoy your retirement, even over-exuberance and excitement.
With FOBI, or the Fear of Being In, it’s the panic of watching your hard-earned cash just disappear... poof... In moments of alarm like this it’s important to remember that the market is cyclical, and investing is a long-term game for a long-term gain.
Warren Buffett famously said that investors should “be fearful when others are greedy, and greedy when others are fearful”. By this, he means that when a stock is generating a buzz, when it’s the next big thing, its profit margin is already too low to bother about.
Take Bitcoin - in 2017 it hit a then-historic high of $19,783, only to fall below $3,500 in November the following year. And just recently Bitcoin’s price hit an all-time high of $58,000 on 21st February, yet has crashed by over $10,000, taking it back below $50,000 after weeks of strong gains. In fact, the digital currency has risen by around 67% since the beginning of 2021. Not for the faint of heart.
When you’re investing, you’re not gambling or day trading, you're tucking your money away for five or 10 years, and sure it’ll rise and fall, but it won’t remain stagnant as it does in a bank account with its low interest rates. It’s passively doing its thing in the background. But that doesn’t mean you should be complacent!
When we face the Fear of Missing Out or the Fear of Being In, it’s important to remember to breathe. Take stock (pun intended) and wait a minute. Patience, dear friend. Quell those feelings of panic, possibility, terror, euphoria. Investing comes down to conviction and discipline.
Your investments are living beings circulating in an ocean of other living things, for them to survive you can’t just throw them out into the world and hope for the best. They must be revisited, nurtured, tuned to their surroundings. By revisiting and tweaking the ideas you have out there you could negate both FOMO and FOBI.
There’s no FOMO when there’s a science to being right.