7 Strategies To Deal with Stock Market FOMO

The Fear Of Missing Out (aka FOMO) is a real thing. Most of us are familiar with this concept in the social and professional realms, but FOMO is also a major issue in the personal finance realm for many investors. 

What does stock market FOMO actually mean?

You may be wondering exactly what FOMO looks like in the investing realm. Stock market FOMO presents itself in a few different ways. 

• Fear that you should have bought when you didn’t 
• Fear that you should have sold when you didn’t 
• Fear that you should not have bought when you did 
• Fear that you should not have sold when you did

You get the picture. You can slice and dice the fear, greed, regret, and worry that FOMO encompasses in a multitude of ways. 

Understanding the impacts of stock market FOMO 

If you’re sitting there thinking, “I’ve regretted buying X stock before”, or “I wish I hadn’t sold those Y stocks when I did”, does that mean I have stock market FOMO? Probably not. We all make decisions in life and wonder what could have happened had we made a different choice. It’s human nature to ponder alternative outcomes every so often. 

FOMO, on the other hand, has a much more serious impact on a person’s mental health and often clouds their decision making ability. That’s a particularly dangerous thing when it comes to the stock market.

Stock market FOMO and decision making

Stock market FOMO is often driven by missing a selling opportunity at the peak of a stock’s price, or a buying opportunity at a stock’s rock bottom. The FOMO effect is often heightened when these peaks and valleys in stock market prices are parroted heavily in the news or social media. The more people talking about a stock price, the worse the FOMO feels to those who missed out. 

The dangerous part occurs when investors start making decisions trying to capture some of what they missed, based purely on the emotion of not wanting to miss out even more. But this is contradictory to one of the cardinal rules of investing, particularly active trading. The market is forward-looking. And when you start making trades based on emotional reactions to what’s happened in the past, you start ignoring risk and other pertinent information that could heavily impact your opportunity for success.

Successful day traders minimize their emotions

Successful day traders are, in fact, much more clinical than you might like to think (especially compared to what is often portrayed in Hollywood). Trading has a romanticized reputation in much of the media, and it couldn’t be farther from the truth. Those who day trade successfully do their best to minimize emotional impact. 

That’s because emotions can have an incredibly strong influence in human beings and cause us to take unnecessary levels of risk. The hormones released from certain emotions cause both physical (think sweaty palms, heart racing, etc.) and mental (anxiety, dread, etc.) responses. Good trades are made with a strategy and by using data, not emotion. 

So, how can we go about minimizing FOMO and other emotions in the stock market?

7 Strategies to help you deal with FOMO in the stock market 

1. Be honest with yourself

If you’re an active trader and find your heightened emotions pulling your decisions in different directions, it’s important to consider whether or not this style of investing is right for you. As we’ve discussed, emotions in investing can be very dangerous. Especially FOMO, and especially for active traders.

2. Choose your investment strategy carefully and write it down

It’s important to take the time to consider and fully develop what you want your investment strategy to be. You’ll need to assess things like your goals, investment horizon, and risk tolerance. It doesn’t necessarily need to be written in stone, but it should be something fairly concrete. Sure, you’ll make tweaks and reassess this strategy over time and surrounding big life events, but not on the daily. You want to choose your strategy carefully by using data to back up your goals and then stick with it. 

Why write it down? There are a number of proven psychological benefits that come with physically writing something down. Three of the most important ones which are especially relevant to investing are that writing things down:

• Helps solidify your focus on the topic 
• Allows you to recognize and process your associated emotions
• Means you’re more likely to keep yourself accountable and stick to your plan

3. Be wary of who you listen to

FOMO is all about missing out, right? So if you find yourself listening to other people who keep drawing your attention to things you feel like you missed out on, that may only serve to intensify your emotions. Is Joe Schmoe constantly talking about Gamestop? It might be worthwhile to ask him to leave the stock market topic out of your conversations. 

4. Be smart about your stock market news and media consumption

The news and social media can be just as FOMO-inducing as your friends and family can be, if not moreso. Pay attention to outlets that might be amping up your emotions and driving you to want to make decisions that go against your strategy. Consider reducing the amount that you watch those particular outlets, or find another source that is less emotionally inciting. 

5. Automate your investments

Another cardinal rule of long term investing is that time in the market is much more important than trying to time the market. If FOMO is pushing you to break that rule, consider setting up automatic investment deposits to take that temptation out of your hands. Many investment platforms make this incredibly easy to do with a quick adjustment to your settings. M1 Finance and Betterment are two favorites here at The Ambitious Dollar that offer auto-invest features. 

6. Quit looking in your rearview mirror

Of course it’s important to learn from the consequences of your actions, but it doesn’t serve anyone well in the long term to beat yourself up over past mistakes. Dwelling on what could have, should have, or would have been won’t change the outcome.

Stop keeping track of stocks that you used to own unless you are truly considering buying them again in the future. And only consider making that purchase if it aligns with your strategy and is data driven. Do not consider buying those stocks again for the sole purpose of trying making up for a previous loss. Remember, the stock market is forward looking. FOMO is backward looking. 

7. Keep learning

Even the most successful investors lose money on their investments from time to time. However, the more you know and the greater your knowledge base, the more confident you’ll become with your decision making. The more confident you are with your decision making, the less likely you’ll be to allow emotions and FOMO to creep in. 

There are a ton of great, free resources out there to help you learn anything and everything you might want to know. Whether you prefer books, podcasts, or Youtube videos, the world is your oyster.

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