The Investor Diary Entry #43: June 17, 2023
FOMO has become such a buzzword in practically all life aspects. Expecting that everybody knows the meaning of FOMO is a trap that most people fall into. Therefore, before we delve into learning how to get rid of FOMO and understand the FOMO effect in investing, we will talk a little bit about FOMO.
FOMO is short for “fear of missing out.” The first time I heard this term was in relation to social media. They say that one of the main reasons why people are stuck on social media platforms is the fear of missing out.
After that, I started hearing the term thrown in every B to C industry. FOMO became one of the main reasons for many issues facing industries catering to individual needs.
FOMO And Investing
To my understanding, FOMO takes one major form in investment in general and investing in stocks in specific. It is when a certain financial instrument or stock gets the attention of investors and the share price starts to soar. People start jumping in out of fear of missing out (FOMO) on the big winnings of that stock or instrument.
When people jump on an already hyped-up stock without proper analysis, and without following a strict investing strategy, then the result is most probably not a beautiful one.
Even if it worked out once or twice, acting on sheer emotion without a solid investing strategy, is a formula for disaster. If one acts like this on every stock investment decision then that person’s portfolio is based mainly on hearsay and hyped stocks.
When things go down, this portfolio is going to be hit very hard.
I Got FOMO
This diary entry comes after a long period of disappearance. Many things are happening in my life, which took me away from investing and journaling in this blog.
My last entry was dated May 24th, 2023. Meaning that after one week I would have been away for a whole month. At the time the individual stocks that I was evaluating were Aurora and Nikola.
The first is within the Autonomous Driving Industry and the Latter is Fuel Cell Truck Manufacturer. Therefore, before starting to preach on how to get rid of FOMO in investing, I should tell you what I did during the past week.
I was closing shop on a project that I was working on for a very long time. I have house maintenance projects which only today started moving forward. I started attending a new training course which I am going to talk about in future entries.
Actually, this entry was supposed to be on this training course that I am taking, but what I did during the past week should not pass without blogging it.
Those three main reasons and other side issues, made me lose my daily routine totally and affected the way I make decisions.
While reading Aurora’s annual report its share price was at $1.25, after finishing the valuation, and found that the higher assumption was at USD1.45, the price was USD1.35. I don’t have many technical analytical skills; therefore, I didn’t know which direction the price was heading.
On many occasions, I would buy a stock and just after I buy it, it starts going down. Sometimes, I feel it was waiting for me to make the buy order to make its move Southward. AUR price was ranging between USD1.3 and USD1.5. I decided to wait without looking at any charts, especially since I was very busy.
One day while I was studying Nikola (NKLA) I found AUR at USD1.86. I got so mad, and FOMO started to take its effect on me. I put a Limit order at that price. It didn’t hit it and kept creating up till I finally made a spot order at USD2.1.
A similar story happened while studying NKLA but one thing was in play here, is that the whole future of the company was at risk and the share price was at USD0.70. It shot up to USD1.6 but (listen to this), I considered myself lucky to get it at USD1.39.
This was not investing, this did not follow any strategy, and it was played purely out of fear of missing out on those stocks.
How To Get Rid Of FOMO
I decided that I would still buy more if those stocks went down to their previous levels. I would still need to study and decide whether NKLA is worth the risk, as stopping its operations is a scenario that is not far off.
My plan to get rid of the FOMO effect lies in the training course that I am taking now. On the 10th of June 2023, I enrolled in an offline training course about trading Forex.
For a very long time, I wanted to learn to trade and know how to conduct technical analysis on a chart to predict the direction of a certain instrument. The motive to learn trading is multifaceted, but the way it would help me in my investment decisions is to try to predict the stock direction to minimize the psychological effect when I make an order.
I am not trying to time the market, or at least I hope this does not mean so. My intention is not to time my entry, but at least knowing the direction would give me more information that would aid my order decision-making.
In my opinion, the one thing that would help get rid of the FOMO effect in investing is having an investing strategy that one believes in. If one has an investing strategy but does not believe in it, then one would find in many cases that deviating from that strategy is very easy. This would lead to a chaotic investing environment and leaves space for emotions to take the investing steering wheel.
Conclusion
Investing is a business. One sets up objectives, strategies, and implements the tactics based on the set strategy. When things need to change, then make the strategy changes and act accordingly.
The stock market is not a shopping mall. One does not buy a stock for fear of missing out on the new trend. I hope the reader realizes that I am preaching to myself and not to any other person. I messed up big time this week because of the huge distractions that I was facing.
This evening I am attending the 4th class of the trading training. My next entry is planned to talk about this topic.
The Investor
Saturday 17 June 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second, as a place where I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly, as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
For more detailed information on my affiliate disclosure please refer to the Full Affiliate Disclosure page, and if you are interested in building your own online business you can check this post here.
Furthermore, this site is in no way or form giving any financial or investment advice, nor it is encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my progress and share it for informational, educational, and entertainment purposes.