When everybody is getting rich but you, investing FOMO takes over! Investing FOMO is the hardest type of FOMO to conquer.
FOMO stands for Fear Of Missing Out. The term is usually reserved for those who spend everything they have to buy the latest thing or experience without any regard for their financial future.
FOMO is what drives people to go into revolving credit card debt, making credit card hawkers rich, and their slaves poor.
FOMO is the main reason why people are unhappy, even if they are living better than 99% of the world. Investing FOMO is when you chase an investment that has already risen by 1,000%.
Those who refuse to save for retirement justify their spending by saying, “you can’t take it with you.” It’s true. No matter how much gold you bury in your grave, your spirit takes nothing physical with it.
But after starting my investment tracker series, I’ve come to realize that investing may be the ultimate case of FOMO. Spending all your money on useless things doesn’t even come close. Let me explain why in three reasons.
Investing FOMO: The #1 FOMO
With the stock market at record high and speculative assets like Bitcoin, Dogecoin, and more going ballistic, investing FOMO is at the highest level it has ever been. Hence, we should be careful. Let me share why investing FOMO is the worst type of FOMO.
1) Everybody is getting rich, so must I.
After violently correcting in 2008, the S&P 500 has done well since January 1, 2009. For the first four years, I, along with plenty of skeptics had our doubts about the recovery. The markets were simply recovering what they lost. But when the S&P 500 and other indices started breaching their pre-financial crisis highs in early 2013, investing FOMO really began to kick in.
It no longer felt as good to have money locked up in a 4.1% yielding CD. Instead, it was all about daring yourself to go maximum long stocks and real estate. Cash and CD savers were falling behind. I stopped seeing myself on the platform patiently waiting for the train. Instead, I was starting to run after the train as it began pulling away.
Doesn’t Matter If You’re Already Rich
Even if you’ve reached a financial level where you don’t really have to worry about money again, you won’t feel good if you see other people growing their wealth faster.
For example, you could have a $10 million net worth grow by 5% one year. That’s a nice $500,000! However, you’ll start feeling investing FOMO if you see someone with only a $500,000 net worth grow by 20% during the same time period.
Instead of being happy making $500,000 doing nothing thanks to a top one percent net worth, you’ll start feeling bad you didn’t make $2,000,000 taking the same amount of risk! Crazy right? Investing FOMO.
It’s only when your peers earn a similar or worse return will you be satisfied with your performance. Even if you only made a 1% return, if your peers made a 0% return you’ll feel happier than making a 10% return if your peers made an 11% return.
Investing FOMO is the only way to keep up with the rich. Otherwise, you’ll be on the wrong side of the wealth gap as it continues to widen.
2) The fear of never being free while you’re still healthy.
The older you get, the more you’ll worry about never being able to get out of the rat race. You start asking yourself, “is this all there is to life?” You’ll also start resenting your job and the people you see more than your family every single day.
It’s natural after doing the same old thing over and over again. As a result, you’ll start kicking your savings and investing into high gear so that you might one day be able to engineer your layoff and live life on your own terms.
Those who are more aware are able to quantify their purchases, not only in after tax dollars, but in terms of time. For example, buying a $300,000 more expensive house because it has one more bedroom you’ll never use equals at least 10 more years of work if you only save $30,000 a year.
No rational person would choose driving a Porsche and buying a mega mansion if the cost was a 20 year delay in achieving financial freedom. Stretching your finances every month is a stressful way to live.
Investing FOMO gives you hope that you’ll one day enjoy your freedom while still being able to walk, talk, and live pain-free.
3) The fear your children will have a worse life than you.
The amount of <40 year old angst about student debt, stagnant wages, underemployment, and unaffordable home prices is overwhelming. You don’t want your kids to turn out the same way.
The more in tune you are with the way the world works, the more you realize the importance of investing for your children’s sake. The top 1% – 0.1% have garnered the lion’s share of gains over the past several decades because they’ve been active investors in appreciating assets.
The trend will continue as family dynasties are being formed to ensure that generation after generation of kids will have every single advantage in life. Investing FOMO makes parents want to invest more than they should based on their true risk tolerance.
Investing is one of the main ways to make sure your children don’t end up further and further behind. If you don’t invest, your sons or daughters will have a much harder chance of getting into a prestigious university. They may have a more difficult time getting a sweet job because the spots will all be taken by kids of wealthy parents who buy their children’s way into everything. When there are 10 applicants for one spot that all look alike, the tie-breaker often comes down to money or connections.
Not only am I investing the majority of my income every month so that my children can have more options, I’m also working hard at building contingency plans, just in case they don’t do well in school, is discriminated against based on his race, gets into an accident, and I can’t compete in terms of donations and connections.
For Those Who Lack Investing FOMO
If you don’t feel investing FOMO, please share with us your secret.
I’ve struggled with managing my fear of failure for a very long time. I always felt pressure not to be a disappointment to my parents because I got into so much trouble during high school.
Once I hit 40, after not having a job for six years, I slowly started losing some investing FOMO. But investing FOMO is knocking on its dungeon door in my head, wanting to get out!
Parental FOMO has revived my motivation to stay as fit as possible and generate as many contingency plans as possible. I’m aggressively building my passive income investments. Further, I’m likely going to renew my term life insurance policy for another 20 years.
I’m truly envious of those of you who are able to spend freely, not chase the current hot tech stock, eat whatever you want, and not worry so much about your future and your children’s future. I wish I could let go and just kind of wing it.
There’s Just So Much Wealth Out There
Unfortunately, I keep getting shown how the future works because I’ve had the opportunity to go behind the scenes.
I’d much rather NOT know that my friend’s son got into XYZ school because of a $1 million donation. I don’t want to know that my other friend’s daughter got a job at PYQ investment bank because they are private wealth clients with over $30 million in assets with the firm.
I’m stuck in a world where so many people I know are extremely successful thanks to stupendous careers, amazing businesses, and savvy investments. That’s the problem with living in big cities like San Francisco, New York, Hong Kong, or London. They seem to attract the most gung-ho type of people.
Their success naturally pushes you to do more. If you don’t want to do more, then you should highly consider getting out.
At first, getting to know extremely successful people was a novelty. Now, I often wonder, why are they STILL working when they could spend time with their kids or make a difference in other people’s lives who have way less.
Investing FOMO Reduction Plans
I took the first step of FOMO reduction by leaving Manhattan in 2001. I moved to San Francisco to live a more balanced lifestyle. NYC is the greatest city on Earth. However, it will eat you up and make you miserable if you aren’t careful.
Then in 2014, I moved out of the wealthy north side of San Francisco to a middle-class neighborhood on the west side. It feels great living next to plumbers, grocery store managers, house painters, and retirees.
By 2023, I plan to take a larger step in FOMO reduction by moving to Hawaii, where life is more laid back. San Francisco has one of the lowest children per capita in the country. I think it would be nice to raise a family in a family friendly environment.
Finally, to reduce my investing FOMO, I will continue to carve out between 10% – 20% of my investable assets on individual investments. These individual investments include, real estate crowdfunding, venture debt, venture capital, and my favorite growth stocks.
I plan to keep aggressively saving and investing the majority of my cash flow because investing FOMO is hard to quit! However, now that I’ve declared my plans to re-retire under the Biden administration, I’m slowly de-risking. And in the process of de-risking, I’ve discovered my investing FOMO isn’t making me feel bad.
With such tremendous gains over the long-term historical average since the pandemic began, I’m happy to take money off the table. After all, the first rule of financial independence is to never lose money!
More Thoughts On FOMO
- FOMO may be a big reason why many delay having children.
- Children change everything when it comes to being financially responsible. There’s no other option but to get your financial act together. Once you have someone with zero earnings power and little knowledge depend on you for 18 years.
- You may feel better living in a middle class neighborhood than in a rich neighborhood. In rich neighborhoods, your neighbors are always doing some type of remodeling. They also tend to drive more expensive cars, go on fancier vacations, and send their kids to private schools.
- You may experience FOMO reading personal finance sites like mine. If so, take a break, and focus on your own financial goals. They are the only ones that matter.
- Investing FOMO is natural in a bull market. But I’m trying to go the other way and pay down debt and raise cash. After such a massive bull run since the pandemic began, capital preservation makes sense.
Best of luck with conquering your investing FOMO everyone! May you get rich and stay rich by regularly converting some of your gains into real assets.
Diversify Your Investments Into Real Estate
Stocks are very volatile compared to real estate. Therefore, if you want to dampen volatility and build wealth at the same time, invest in real estate. Real estate is my favorite asset class to build wealth.
The combination of rising rents and rising capital values is a very powerful wealth-builder. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain real estate exposure.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
Readers, do you have investing FOMO? If not, why not? Do you believe investing is the greatest FOMO there is? How do people successfully go through life without feeling the need to invest?
Graphic by Colleen Kong Savage.