[Summary]
FOMO is the psychology of buying out of fear of being left out.
What makes us more likely to fail due to FOMO is not the lack of knowledge itself, but the fact that we end up justifying our hasty decisions afterwards.
In actual investing, you first start by writing down the reasons why you would buy a stock when you see it rising rapidly. However, we cannot overlook the fact that it is easy to grab high prices after a rise.
In this article, we will organize FOMO not as "knowledge" but as a step to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
The first thing to classify based on FOMO
When looking at FOMO, first determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. FOMO is not the only factor in making decisions. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Situations where you can easily fail due to FOMO
If we look at FOMO as a pattern of failure, we first need to make narrow assumptions. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
Checking the following points will make things a lot easier.
| Axis to check | What I see with FOMO |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
FOMO doesn't just come from a lack of knowledge. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Don't make a buy/sell decision the moment you see FOMO
- Don’t mix your own holding period with the time frame that suits your FOMO
- Don't increase your position to recoup your losses
- Don't make a decision just based on SNS or rankings.
The important thing here is not to settle on one correct answer based solely on FOMO. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before using FOMO as an actual decision factor, check at least these five things.
- Can you explain in one sentence the purpose of viewing FOMO?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking FOMO is not to act faster, but to reduce unnecessary mistakes in judgment.
Summary
FOMO is a material for organizing investment decisions. Even if you read it as a failure pattern, treating it as a standalone buy/sell signal will lead to poor judgment.
The points to keep in mind are as follows.
- Decide the purpose of viewing FOMO first.
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to treat FOMO as a tool to pause before buying or selling, rather than a word that forces you to make a hasty decision.