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The Fear of Missing Out: How FOMO Shapes Our Financial Choices

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By Shubham Pathak
Content Manager, Bajaj Finserv AMC | linkedin
Shubham Pathak is a finance writer with 7 years of expertise in simplifying complex financial topics for diverse audience.
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The Fear of Missing Out
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Despite popular belief, money decisions are often influenced by more than just facts and figures. Emotions play a strong role in shaping how we spend, save and invest our money. FOMO, or the fear of missing out, plays a big role in this context. In the world of investing, stock market FOMO can push people to act quickly without much thought, only because everyone else seems to be making money. Understanding FOMO investing and learning how to manage it can help investors take more balanced money decisions.

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What is FOMO in investing?

FOMO in investing happens when people are worried about missing opportunities that others are talking about. For example, when friends discuss a stock that has gone up sharply, or when social media may highlight stocks as the ‘next big opportunity,’ often without full context or clarity on risks, investors may feel the urge to join in. The fear of being left behind can feel stronger than the need for careful analysis. This typically leads to herd mentality investing, without fully knowing the risks involved.

Also Read: What are money market funds?

Behavioural basis for FOMO investing: Social proof and herd mentality

Investor psychology can explain why FOMO feels so powerful. Two ideas are especially relevant here:

  • Social ‘proof’: When we see many people doing something, we assume it must be correct. If everyone is buying a stock, it feels safe to follow.
  • Herd mentality: Humans naturally tend to copy group behaviour, especially in uncertain situations. In investing, this can mean rushing to buy shares just because others are doing it.

Following the crowd can create a sense of belonging, but it rarely translates to sound money decisions.

Risks of chasing trends

While it may seem exciting to follow the latest trends, FOMO investing carries certain risks:

  • Buying at high prices: By the time most people hear of a rising stock, it may already be overvalued. Entering late can lead to potential losses if prices correct.
  • Short-term mindset: Focusing only on chasing quick profits can shift attention away from steady, long-term planning.
  • Emotional stress: Constantly worrying about missing the “next big thing” creates anxiety, which can affect everyday life.
  • Lack of clarity: Decisions based on herd mentality stocks often ignore basic questions, like whether that particular company’s stock is fundamentally sound, matches your risk profile or is relevant to your portfolio based on your personal goals.

These risks show how stock market FOMO can cloud judgement and push people into choices they may regret later.

Practical steps to counteract FOMO

Avoiding or reducing FOMO trades may be possible with a few small and steady practices.

  • Wait before acting: Always wait for a short period of time before making any investment. Even a day or two may bring more clarity.
  • Focus on personal goals: Ask if the investment supports your own needs, such as building a corpus for education or buying a house.
  • Limit noise: Reduce the time spent on constant market updates or chat groups that promote tips.
  • Seek knowledge: Basic research about a company, or understanding the risks, can reduce the blind pull of herd mentality.

These steps may not remove FOMO entirely, but they can create space for more thoughtful decisions.

Building discipline through planning

Long-term planning can reduce the pressure of sudden trends. Some simple methods include:

  • Budgeting for investments: Decide in advance how much of your income goes into investments each month. This prevents random large trades.
  • Diversification: Instead of putting money into one idea, spread it across different options to balance risk.
  • Regular reviews: Check investments at fixed times, rather than reacting daily to news.
  • Writing down rules: Create a personal checklist, such as “I will not buy a stock without understanding its business”. This helps during moments of temptation.

Such habits help gradually build discipline and shift the focus from short-term excitement to long-term steadiness.

Also Read: Understand Benefits and Investment Risks of Money Market Funds

Summing up

  • FOMO investing happens when the fear of missing out becomes the reason behind our investments.
  • Investor psychology, through social proof and herd mentality, makes FOMO compelling.
  • Chasing herd mentality stocks has disadvantages, like high entry prices.
  • Avoiding FOMO trades requires small steps such as pausing, setting goals, limiting noise, and doing basic research.
  • Building mindful discipline through planning can reduce the pull of stock market FOMO.

The journey of investing is all about staying calm, patient and connected to your own personal goals. Over time, this approach can help create more balance and clarity in financial choices.

At Bajaj Finserv AMC, we recognise that emotions are the cornerstone of investor behaviour – not just for investors but for investment professionals too. That’s why, behavioural finance is at the heart of our investment philosophy, InQuBe, which combines the Information Edge, Quantitative Edge and Behavioural Edge. By understanding, tracking and monitoring market sentiments and our own investment biases, we seek to make mindful and strategic investment decisions. Get the Behavioural edge by investing with Bajaj Finserv AMC. Read more about InQuBe here.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed.The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.

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By Shubham Pathak
Content Manager, Bajaj Finserv AMC | linkedin
Shubham Pathak is a finance writer with 7 years of expertise in simplifying complex financial topics for diverse audience.
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

 

The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed. The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.

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Author
Shubham Pathak
Content Manager, Bajaj Finserv AMC | linkedin
Shubham Pathak is a finance writer with 7 years of expertise in simplifying complex financial topics for diverse audience.
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