Don’t Let The FOMO Buzz Affect Your Investments

Most of us would have experienced the concept of fear of missing out (FOMO) at least once in our life. It could trigger when your neighbour buys a bigger car than you, your friends post pictures of holidays abroad or fancy eating places and the like.

If you have ever given in to that trigger and ended up spending what you can’t really afford, you would have borne the financial repercussions, too. That can lead to debt and throw your savings completely astray. But when you give in to that behavioural aspect in investing, it’s likely to throw your investments in disarray and take you farther from your financial planning goals on the back of indiscreet decisions.

Back in 2020, during the early months of the Covid-19 pandemic, Vodafone Idea was in the news almost every day with rumours flying that tech giant Google was considering a sizeable stake in the struggling telecom operator. That’s when Piyush Aman, a 27-year-old finance professional based in Delhi, took a trade in the stock.

“I saw the news and heard people talking about it at work, so I just bought it,” says Aman, who did not want to miss out on the opportunity.

And, it worked. Aman invested around Rs 10,000 at around Rs 4 per share and exited at Rs 11.25 per share within a few weeks. That made him feel in control of his decisions and investments.

So, when Paytm launched its much-anticipated initial public offer (IPO) in 2021, Aman didn’t hesitate to take the gamble again. “I thought Paytm was a great company, and all my friends and colleagues were saying it would give good returns, that it was top notch and all that,” says Aman.

But this time, things didn’t go as expected. The stock started tumbling soon after listing. Aman exited with a small loss of Rs 700-800.

Such behaviour is common among new investors driven by FOMO.

What Is FOMO?

Professor Agnihotri from the College of Vocational Studies, Delhi University, says, FOMO in investing is fundamentally rooted in greed.

“It typically plays out when investors observe a stock rising rapidly, say from Rs 100 to Rs 140 over a few sessions, often hitting upper circuits daily. The rally creates a psychological urgency and investors begin to fear that if they don’t enter now, they might miss out on further gains, even when they suspect the rally may soon reverse.”

Social pressure also plays a crucial role in such decision-making. Agnihotri says that retail investors from middle-income backgrounds are often more vulnerable to this mindset. “They want to get rich fast. And the hype from media and influencers adds to the urgency and they end up investing,” he adds.

He offers a simple analogy: “If you see a city bus that is too crowded, don’t get in. Wait for the next one. The same thing applies in the stock market. You do not have only one stock which will give you money. Don’t chase. Wait. If you like the stock, let it correct—then enter.”

Yadav of Sanctum Wealth, says: “The rise of social media, influencers, trading apps, and greater access to information has created a heightened sense of urgency, intensifying the fear of missing out. Instant updates, increased hype, and easy trading access make impulsive decisions more likely. This environment can lead investors to make emotionally driven and less considered choices.”

The best thing to do, experts say, is to focus on your own portfolio, take professional advice if needed and not get swayed by what others are doing.

How To Overcome FOMO In Investing?

Have A Strategy: Establish a well-defined investment strategy and stick to it before starting to invest to avoid FOMO.

Fix Your Risk And Return Metric: Have a framework that always reflects your specific risk-return.

Core And Satellite Approach: Adopting this structure can also be effective.

Core Portfolio: The core portfolio, which forms the bulk of investments, should follow a disciplined, well-defined strategy.

Satellite Portfolio: The smaller satellite portion can be allocated to more opportunistic ideas, allowing some flexibility without compromising the core.