What is FOMO and how can this psychological effect affect the way you invest?

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It may have happened to you on some occasion that you see your group of friends or family excited by a new fashion product and although you are not very surprised, you feel the need to be part of this and decide to buy it, to realize time later that you really didn’t want it or didn’t even know how to use it.

This feeling is what is known as FOMO and this word comes from the acronym “Fear Of Missing Out”, this simple feeling can make us take actions in a hasty way that in many cases are not the right ones or for the right reasons.

FOMO is a concept that tries to explain the feeling or need that a person feels for not letting go of what for them would be an “opportunity”, this feeling may not seem very dangerous at first glance and may not be, however being in a state of fear by being left out of something we can make very biased and hasty decisions.

A clear example of this type of mental state can be when we get excited about the release of a new phone with new features, being part of a new topic such as a viral challenge on social networks, or even FOMO can occur in topics that they are a little more important and serious like investing in volatile financial assets or in the Cryptocurrency market. A very general representation of FOMO has been the various occasions in which the price of Bitcoin has risen uncontrollably, where many are influenced by the media, or by people who talk about it and begin to get into what is known as the “Fear Of Missing Out” deciding to invest when prices are through the roof.

In general, the people who have been affected by FOMO are those who have not really taken the necessary time to study or learn about the Cryptocurrency market and settle to operate in this system knowing only the basics or what they have heard about from a third party. The problem with entering the Crypto market in this way is that people create false expectations that are sometimes greatly exaggerated.

How can FOMO influence FUD and your investments?

As we mentioned before, FOMO is a state in which an individual can make the decision to buy or do something, due to the simple fear or social pressure of not being part of something, but how can this affect our investments in the future? Well, this state of fear is the prelude to another psychological phenomenon called FUD, which is a term that we will delve into in more detail in another article, but in summary it is the fear or doubt that we can feel when we are not sure what can happen in the future, it is basically the uncertainty and anxiety that it gives us when thinking about whether we made a correct decision.

This is why when we take FUD and FOMO into account in an event, whether it is the purchase of Cryptocurrencies or anything else, the result in most cases is negative. Since with the fear of missing an event we find ourselves with the need to be part of it, either by acquiring a stock that is having good returns or a Cryptocurrency whose price has risen in recent months; And by now being part of “something” at the slightest opportunity that something starts to go wrong or to be affected by something else, that is when fear or uncertainty arises that it could happen in the future, and most of the time the people who have been through these two stages tend to either pull out of the event or sell the asset they have purchased.

Something that we must make clear is that in a certain way it is almost impossible not to feel this type of fear or doubt, because we are humans and not machines without feelings, and these feelings can sometimes harm or help us, which is why we must control and identify these types of feelings of fear and analyze if they are correct or we are just being part of a commercial strategy designed to create FUD in us.

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Is FOMO good or bad?

In a certain way, feeling excited about something new or something that we are passionate about and going headlong for it is not bad, however, the feeling of being part of something just because everyone is going in that direction, yes. It is bad, since as we have shown many times we enter something or want to be part of something without even knowing what we are entering, which is why many recommend that if at any time you feel FOMO within the context of investments in Cryptocurrencies the best thing is to study and delve into the subject and see with a critical eye and objectively why it is causing so much commotion, and after having done this analysis, then you can choose whether you want to invest or not.

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No, as I mentioned before, it is one thing to buy for the simple fact of being fashionable and being part of the new trend that is found in the market, and another very different thing is when you really want or desire to buy something and you take the trouble to investigate and learn about the product in question.

Although there are things we can do to avoid it, it is inevitable not to feel FOMO at least once, but a good technique to counteract this feeling is to be aware of the importance of the research behind each investment or purchase.

Of course, any sensation that is of psychological origin can affect an investor’s decision-making, such is the case of FOMO and FUD, however, by understanding these concepts it is easier for the user to identify these sensations and in a certain way control them.

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