Investing is now easier than ever in the digital age. Anybody can purchase stocks, cryptocurrencies or mutual funds with a few smartphone taps. FOMO or the fear of missing out is one of the most prevalent psychological issues brought on by this convenience. In the context of investing FOMO is the emotional reaction that occurs when we observe others appear to achieve rapid and significant returns leaving us feeling excluded or behind. There is pressure to act fast frequently without conducting sufficient research in order to avoid missing the boat. From an Islamic standpoint, choices should be based on consideration and reason particularly when they involve money and long-term effects. The Quran highlights the value of applying our intelligence in all facets of life. As stated by Allah ﷻ:
“Indeed, in that are signs for a people who use reason.”
(Surah An-Nahl: 12)
This verse serves as a reminder that making thoughtful well-considered decisions rather than mindlessly following the herd is the path to true success in any industry including finance. By using this idea when investing we can avoid making expensive errors that stem from gut feelings rather than sound judgment.
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Recognizing the Risks Associated with FOMO
After reading about someone doubling their investment overnight online or hearing about a friends successful trade, FOMO can initially appear subtly as curiosity or a sense of urgency. When sensational headlines, viral videos and online debates extol extraordinary returns what starts out as curiosity can swiftly turn into anxiety. The risk is that FOMO causes investors to join markets later and at frequently unsupportable prices. FOMO-driven investors buy high out of fear and sell low out of panic as opposed to buying low and selling high. This is emotionally draining as well as financially detrimental. It undermines self-confidence and makes investing a never-ending cycle of following trends and losing money. Moreover FOMO impairs judgment. It promotes a short-term mindset overrides due diligence and forces people to abandon their financial plans. Many investors prioritize short-term gains over long-term objectives such as saving for retirement or accumulating wealth gradually. Sadly the risk increases with the speed of gain and regrets are frequently the outcome of FOMO-driven choices.
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Effective Ways to Prevent FOMO
The key to avoiding FOMO is to approach opportunities with discipline and reason rather than by ignoring them. Making your own investment plan is one of the best ways to do it. Your financial objectives, risk tolerance, time frame and asset allocation plan should all be part of this. You’re much less likely to become sidetracked by market noise or erratic trends if you have a clear roadmap. Conducting independent research is another crucial strategy. Never invest in something merely because its popular or because someone else says they made money on it. Examine the assets fundamentals: What are the risks and prospects? Does it fit your objectives? Doing your own research not only boosts your confidence but also keeps you from depending on rumors or hype.
Managing your exposure to media and social media sites that encourage irrational expectations is also crucial. The best moments are frequently highlighted on social media with users sharing their victories but infrequently their setbacks. Because of this we perceive things differently and believe that everyone else is achieving success more quickly than we are. Emotional balance can be preserved by limiting the amount of time you spend on these platforms or at the very least by consuming content critically. Discipline is yet another essential component of wise investing. Once youve decided on a plan follow it. If the market is moving more quickly than you anticipated don’t change your strategy. Refrain from timing the market out of jealousy or fear. Although sticking to the plan isnt glamorous it has been shown to produce better results in the long run.
The emotional fluctuations that cause FOMO are also lessened by diversification. You are less likely to become alarmed by the performance of a single stock or trend when your portfolio is evenly distributed across several asset classes industries and geographical areas. Even in times of market volatility it offers a degree of stability that keeps you centered. Finally give yourself some time to think back on your choices and draw lessons from them. Did you ever allow emotion to override reason? If so how did those choices turn out? Being honest with yourself can help you become more resilient. You will eventually gain more self-control and become less receptive to hype.
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Becoming a Thoughtful and Resilient Investor
More than just keeping your money safe avoiding FOMO involves developing a logical patient and emotionally restrained mindset. It entails acknowledging that its acceptable that you wont seize every chance. Long-term consistency in winning is more important than winning every time. To be a thoughtful investor you must have the guts to reject fads the perseverance to stick to your plan and the humility to acknowledge when you dont understand something. Real wealth-building is not the result of hype or luck but rather of sound planning and persistent work. Ultimately FOMO is a character test. Building financial success with integrity and peace of mind can be achieved by avoiding needless risks and adhering to long-term objectives.
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References
Adroit Financial. (n.d.). Why investors fall for FOMO (Fear of Missing Out) and how to avoid it. https://www.adroitfinancial.com/knowledge/knowledge-hub/64-why-investors-fall-for-fomo-fear-of-missing-out-and-how-to-avoid-it
Forbes. (2023, July 25). 3 ways successful investors avoid FOMO (Fear of Missing Out). https://www.forbes.com/sites/adamsarhan/2023/07/25/3-ways-successful-investors-avoid-fomo-fear-of-missing-out/
FOMO Plus. (n.d.). FOMO dalam investasi: Ikut tren atau cerdas berinvestasi? https://fomoplus.id/fomo-dalam-investasi-ikut-tren-atau-cerdas-berinvestasi/
IDN Times. (n.d.). Menghindari FOMO saat berinvestasi. https://www.idntimes.com/business/finance/theodore-siagian/menghindari-fomo-saat-berinvestasi-c1c2