FOMO is still a thing.

How to avoid it in investing.

Investing and trading are psychological, despite the best efforts of academic researchers to make it mathematical. And one of the very real psychological factors is FOMO, the fear of missing out. FOMO is no longer a thing on social media, but it’s very much a thing that undermines people’s confidence in their finances.

Everyone, it seems, is doing better, so you should jump on whatever everyone else is doing or you will miss out. Already missed out? Well, then, you’re going to be bag lady!

The thing is, people lie about their money all the time. A Trustpilot study released in October 2023 found that 39% of American respondents have lied about money to impress others. I’m surprised it’s that low, actually. Money is so tied up with status and value in our culture that I figure that people lie about money all the time.  

Money is also associated with masculinity, with being a Master of the Universe. So while men may talk a lot about their investing prowess, a famous 2001 study found that women investors outperform men because they take less uncompensated risk and trade less frequently.  More than two decades of additional research has supported that finding, including a 2023 study from Fidelity. Some people talk a good game. Some people chase returns. And some people think they are screwing up when they are doing fine.

You, my brilliant newsletter reader, can feel more confident in your finances by not comparing themselves to others. Also, you can apply the skills you use in other areas of your life to make good decisions. Investing is little more than researching products, looking for a good bargain, and diversifying against risk. It’s just good shopping! (I have a friend who is a brilliant investor, currently retired, who is one of the thriftiest shoppers I have ever met. She loves a good estate sale!)

If you want to see how you’re doing, check out Morningstar.com. Some of their research is free for individual investors, and many public libraries offer full access to their cardholders. Morningstar data can help you evaluate investment funds based on risk and fees, to help you be a better shopper. It’s way more objective and truthful than that person who talked your ear off at a party last weekend.

I’d love your thoughts!