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| Capitalstars Investment Advisor |
What is FOMO?
FOMO is the apprehension that makes us believe that others might have rewarding experiences that we are missing out on. It impacts a lot of the decisions we make in our daily lives, even those involving money. It has existed in the past too, but thanks to agents like social media, we feel it more today. It can be troublesome if it starts affecting your everyday routine and lifestyle. Here's how this phenomenon can take a toll on your financial well-being and how you can overcome it.
Leads to poor investment choices
An investment approach that accounts for liquidity, risk-appetite and time frame often proves rewarding in the long run. However, poor investment choices due to FOMO can have long-term ramifications. For example, one of the major reasons for people to invest in Ponzi schemes was the lure of bumper returns in the short term. However, those who invested huge chunks of their savings into these schemes ended up with massive losses. There have also been cases of investors chasing stocks or new fund offers that have been performing well, without checking their fundamentals, only to see their hard-earned money getting wiped out when the markets nosedived.
Incurring unwanted expenditure
FOMO often triggers anxiety and worries, compelling us to live by competing with our peers. This leads to unwanted expenses that can strain finances and not everyone has a safety net or surplus to rely on. Unwanted expenses can eat into and deplete your savings, thereby impinging on essential life goals. At the same time, this can lead to frictions within the family, leading to a loss of harmony and peace.
Take on unnecessary debt
Unwanted expenses coupled with the anxiety to live a lavish life, often leads to unnecessary borrowings. In the digital age, borrowing from financial institutions is easy. Many firms offer short-term loans within minutes of applying. While such loans are easy to avail, what hurts is the high rate of interest, mainly due to their unsecured nature, i.e. they don't need any collateral to be availed. Also, often these loans are bundled with products and offerings you don't require. High EMIs can not only put you in a financially tight spot but also lead you towards a debt trap.
Take on unnecessary debt
Unwanted expenses coupled with the anxiety to live a lavish life, often leads to unnecessary borrowings. In the digital age, borrowing from financial institutions is easy. Many firms offer short-term loans within minutes of applying. While such loans are easy to avail, what hurts is the high rate of interest, mainly due to their unsecured nature, i.e. they don't need any collateral to be availed. Also, often these loans are bundled with products and offerings you don't require. High EMIs can not only put you in a financially tight spot but also lead you towards a debt trap.
How do we overcome FOMO?
Identify the sources leading to FOMO and practice mindfulness. It also pays to talk about finances with your family members and seek their opinion before investing. If nothing works, seek help of a certified financial planner who will assist in making rational decisions based on your goals, investment horizon and risk appetite.