It’s a familiar scene: the party or ball game where you start a conversation with a neighbor or friend you haven’t seen in a while. After a few niceties, he casually tells you all about the 48% return he’s making on an investment in a drone farm or some such thing. “48%?!” you think to yourself, immediately collapsing into a vortex of panic and insecurity. “Why am I not making 48%?!” You begin to wonder where you went wrong, how you missed the boat, why you lack the connections your neighbor has, and where you can invest tomorrow to achieve such considerable returns. If this amygdala hijack sounds familiar, this post is for you. You have an acute case of FOMO, or the fear of missing out.

FOMO is a very real phenomenon, activated by strong feelings of envy or social anxiety. Most often, it does more harm than good. And FOMO is more prevalent than ever, thanks to social media and our frenetic information-sharing, which make it easy to see other people’s alleged successes and accomplishments minute by minute.

As an investor, knowing that you’re susceptible to this kind of reaction – and taking action to avoid it – can save you some grief in the long run. Here are three ways to overcome FOMO:

  1. Tune out the noise and stick to your plan. Staying the course is the surest way to emotional self-modulation. Assess the latest trend by comparing it to your benchmark and evaluating the facts. How much do you actually need to make this year to meet your long-term savings and investing goals? Sure, a fat return sounds nice, but the truth is that those high flyers often turn out to be duds. They go up 48%, and then down 50%. That’s often the name of the game for new companies developing new technologies that sometimes don’t work out, for example. How would you feel if instead of gaining, you lost that much? Is it truly worth derailing your overall plan for that much risk?
  2. Give that return a reality check. 48% is a massive amount, especially when you consider that the 10-year annualized S&P 500 return is about 8.1% After taking a step back and giving your friend’s story a reality check, that 48% likely sounds too good to be true (and it probably is).
  3. Redirect your envy. While you may be jealous of the luxury vehicle parked in your neighbor’s driveway, I recommend steering your emotions in the direction of his monthly car payments. Or better yet, pat yourself on the back for doing the right thing, sticking to your plan, and knowing that your patience will pay off.

Now it’s your turn. What do you do to tune out the noise? Do you find that having a plan helps? Share your stories here.

 

Heather Pelant is Head of Personal Investing for BlackRock. She is a regular contributor to The Blog and you can find more of her posts here.