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Oct. 24, 2020, 8:24 a.m. EDT

FOMO is every investor’s worst enemy. Here’s how to fight it

Face the fear of missing out so you don’t miss new opportunities

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By Morey Stettner


Getty Images/iStockphoto

Anxious investors tell their financial adviser all kinds of concerns, from money worries to family conflicts to health issues. But there’s one fear that’s particularly challenging for advisers to address: fear of missing out on what others enjoy.

Seasoned advisers are accustomed to doubling as therapists, reasoning with clients who are nervous about everything from shaky markets to their partner’s spending habits. When clients lament not pouncing on investment opportunities, they can become distraught or downright ornery.

“Typically, clients come to us after they’ve heard about something that they think they should’ve invested in,” said Patrick Mulhern, a London-based adviser who works with American expats. “When bitcoin was shooting up every day, they’d call and say, ‘Why isn’t that in our portfolio? Is it too late to get some of that?’”

Like many advisers, Mulhern uses such inquiries as a springboard to step back and educate clients. If they’re beset with FOMO (fear of missing out), he reminds them, “We’re not trying to buy the latest new thing. The flip side of missing out on a scary, volatile investment is that we have a plan that’ll get you where you want to go without taking such high risk.”

Understanding the psychology that drives FOMO helps advisers respond effectively. It’s easier to sweep away someone’s fear if you can identify how it came about. Larry Gamboa, an adviser in Fairfield, N.J., finds that some investors constantly worry about missing the bandwagon.

“There’s often an insecurity about making mistakes,” he said. “So I maintain their long-term perspective, which allows us to avoid costly short-term mistakes like buying high and selling low.”

Behavioral economists analyze how investors think. As more people use smartphones to invest, the temptation to trade frequently — and brag about big gains — increases. Shlomo Benartzi, a finance professor at the UCLA Anderson School of Management, urges advisers to serve as a kind of “app doctor,” recommending that investors scale down their use of mobile devices in making what are often impulsive and emotional financial decisions.

Experts also caution that many of us are subject to biases that can derail a sound strategy and stoke fear. For example, Andrew Rosen,a certified financial planner in Wilmington, Del.,says that “pack bias” can drive investors to chase a passing fad.

“They think that everyone else is buying it so they should too,” Rosen adds. “There’s a fear of being left behind. We’re pack animals. We want to be accepted by our peers. It’s an innate sense of wanting to belong.”

He adds that social media ups the ante. Because many people curate their online lives to portray themselves as perpetually happy and victorious, it leaves the rest of us racing to catch up. “The fear [of missing out] is worse with Facebook,” Rosen said. “We see how others are succeeding and living this great life.”

Rosen coaches clients to overcome FOMO by shifting the focus to their own happiness. If they regret missed opportunities, he’ll ask, “What makes you happy in life?” They may then reflect on the joys of family or their favorite hobbies. So Rosen will highlight how they can take prudent steps to increase their happiness. “I’ll help them reframe their life so that we align their money decisions with what makes them happy,” he said. “That pulls them out of FOMO and puts them on track to live their ideal life.”

More: You have ample savings. So why are you scared of running out of money?

Plus: The 5 questions to ask before choosing a financial adviser

Morey Stettner is a personal-finance columnist for MarketWatch. He is the author of "The New Manager’s Handbook."

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