Much of 2021 has been dominated by the rise of meme stocks and crypto, but investors should be just as aware of the dangers of FOMO.
Ok, it’s been a long month and it seems like all that anyone has talked about on Wall Street are meme stocks, SPACs, and crypto.
But all of this noise can lead to some pretty serious investing mistakes.
FOMO? Say no no…
Emotion is a double-edged sword for investors. On the one hand, you should always invest in companies that you love. On the other hand, the emotion of fear — specifically the fear of missing out — can see us make some silly decisions.
June alone has been littered with countless examples of retail investors buying heavily-shorted stocks at the top. However, the most extreme examples of this took place in January when the likes of GameStop and AMC soared to staggering heights before crashing hard.
When these stocks are rocketing and social media is lighting up with people boasting about how much money they’ve made, it’s very hard not to want to get involved. Similarly, when you see your positions fall 50%, 70% — or even close to 90% like GameStop did at one point — it’s hard not to cut your losses and never try again.
If you find yourself suffering from FOMO as an investor, it’s always worth remembering the words of legendary investor Warren Buffett:
“Be fearful when others are greedy, and greedy when others are fearful.”
Short of winning the lottery, there’s no such thing as ‘getting rich quick’. The risks involved in acting on FOMO are high and it’s always the retail investor like you or I that gets left holding the bag.
Don’t be that investor, be patient, and always remember MyWallSt’s Golden Rules for investing.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.