FOMO is the acronym for Fear Of Missing Out, which translates as “fear of getting lost”. It refers to the feeling of anxiety or discomfort that you feel when other people share a positive or unique experience while you are missing it yourself.
This phenomenon has been magnified with the arrival and rise of social networks They allow us to share especially positive experiences and allow us to know what others are experiencing at all times.
And this has an application in investments. Then the feeling of missing a strong spike in an action invites that feeling, you have to take advantage of this movement! I can’t miss this opportunity!
A desire is forged that pushes us to participate in the price movement, clouding any judgment, which makes analysis difficult necessary of the shares before closing a trade.
The FOMO feeling is the result of our natural tendency to believe that what is happening will continue into the recent future, which is a common cognitive bias. Our primary business emotions are greed and envy: we want to obtain the same benefits obtained by those who are already investing.
If there is a fear of missing something, the consequences are usually quite dire. FOMO leads to irrational thinking and can lead to decisions, which means that people buy or sell in a rush, without supporting your decision in a deep analysis of the investment.
Unfortunately, the FOMO sentiment grows stronger the more the market continues to move in that direction, offering large positive returns. However, the more the price moves, the more likely it is to reverse or retreat. Most FOMO trades often end up as losers, which could have been avoided with a little financial discipline.
We see it clearly with Tesla, a car company that has not stopped rising exceeding $ 1,000 per share and a trillion dollars per market capitalization. Your investors could not be more satisfied. The FOMO tightens.
But the data calls into question this assessment. Its capitalization equals the sum of the big automakers, but Tesla could deliver 900,000 vehicles this year, while all the automakers combined globally can deliver 75 million vehicles.
The same thing happens to us when talking about cryptocurrencies and, in particular, the bitcoin that has recently touched the $ 67,000. FOMO sentiment is particularly prevalent when the cryptocurrency hits another new high or increases in value significantly over a relatively short period of time. This sentiment invites investors not to miss the party and is one of the catalysts for its price.
It is about buying because others did, herd thinking. A published UK Financial Conduct Authority survey found that 76% of young people who invest in high-risk products feel a sense of competitiveness with friends, family and other acquaintances. It’s also contributing a false sense of security: 69% mistakenly believed that cryptocurrencies were a regulated asset.
Source: El Blog Salmón by www.elblogsalmon.com.
*The article has been translated based on the content of El Blog Salmón by www.elblogsalmon.com. If there is any problem regarding the content, copyright, please leave a report below the article. We will try to process as quickly as possible to protect the rights of the author. Thank you very much!
*We just want readers to access information more quickly and easily with other multilingual content, instead of information only available in a certain language.
*We always respect the copyright of the content of the author and always include the original link of the source article.If the author disagrees, just leave the report below the article, the article will be edited or deleted at the request of the author. Thanks very much! Best regards!