Stocks are rising, and even your hair dresser brags about her extraordinary return.
She plans to retire next year and live the rest of her life drinking cocktails in Bahamas.
You know very well that anyone can brag about extraordinary returns at the end of a long bull market, and you know that you should be patient.
Those people, who are most cocky at the end of a long bull market, are the same people who are going to weep into their pillow before bedtime.
You know that, but sitting on your shoulder is a little devil asking questions: Does value investing even work? Should I have invested in pot, crypto and biotek too?
You are suffering from FOMO (fear of missing out), and that is really just another word for greed.
Greed is one of a couple of very destructive emotions that can ruin you as an investor, the other emotion being fear.
Greed has you buying stocks when they are too expensive because you are afraid of missing out on future gains, and fear has you selling those stocks when they fall because you get scared of losing to much.
We’ve all heard the famous Warren Buffett quote: “Be fearful when others are greedy, and greedy when others are fearful.”
It’s so easy with these kinds of one-liners. Anyone can quote him and sound savvy, but how do you really relate to the feeling of FOMO in real life?
The good news is that your ailment can be cured.
Here are six tricks to master FOMO in the stock market.
1. Have a Strategy with Clear Rules
You want to have a plan.
By a plan, I mean you need to have a strategy with a set of rules that you set up for yourself.
One very common strategy is the dollar cost averaging strategy where you invest the same dollar amount every month in a fund, typically in an ETF (exchange traded fund) that matches an index.
If you are a value investor like me, you should have a list of companies that you wish to invest in, and you need to know the price you are willing to pay for shares in the company before you do.
It’s too stressful and confusing to make your decisions everyday as stock prices move up and down in a volatile market.
2. Pick Your Stock-talk People Carefully
You don’t want to discuss your stocks and investment strategy with any random stranger that appears offline or online in your world.
You don’t want to discuss stock picks with your hairdresser, your cab driver or your friend’s neighbor.
Choose carefully who you discuss stocks with and make sure that their vision and strategy is aligned with yours.
That goes for your online chats as well.
Be really careful who you talk to online. Avoid large Facebook Groups with lots of random hobby investors.
Follow the people who are better than you.
I like following Guy Spier on Instagram and Monish Pabrai on Twitter.
If you want to be part of a community online, make sure it’s a targeted community with some kind of monitoring of the conversation.
I run a value investing Facebook Group called Managing Money Freedom and you are welcome to join the discussion here.
4. Stop Keeping Track of Your Exes
We’ve all tried it.
You considered investing in something, but you didn’t and now you keep track of the stock price that has since skyrocketed.
Or maybe you actually did invest in it, sold the shares and regretted it – and now you keep track of the stock price that has since skyrocketed.
The money you could have made if only you hadn’t…
I’m sorry to tell you, but that’s just as pathetic as checking up on the ex on social media to see if he or she is happily married with kids.
It’s over, gone. Let it go.
Stop checking stock prices on your could-have-beens.
If you want to get invested in a particular company then go through your check list to make sure it’s a good investment, calculate the value of the company (you can learn to do that in my free e-book which you can download here) and write down your desired entry price.
Set up an alarm to notify you when the stock price gets close to your desired entry price. You can do that in your trading platform or on most financial websites such as Yahoo Finance.
4. Automate your Investments
It’s such a bad habit to check the stock prices every day to decide when to invest.
You should set up your investment to be done with minimal involvement on your platform.
The fund manager Guy Spier enters his orders after the market is closed so he doesn’t get distracted by the noise of the market.
Why not copy that little trick?
You can set up your limit orders to run for months at a time on most platforms.
If you are using the system of dollar cost averaging into index funds, you can set that up to be fully automated which I really recommend that you do.
5. Think Long Term
Many people talk about their return in a calendar year or even just their returns for the last month.
You have to think ten years into the future.
What if you are close to retirement age? Well, Warren Buffett is 90 years old and he still thinks 10-20 years into the future.
Thinking long-term makes you a more stable and rational investor, so you should make it a habit no matter what your age.
6. Educate yourself
If you feel like you need more guidance, go and listen to the gurus who have been doing this for a long time.
You can search interviews and videos with Warren Buffett on Youtube.
You can read his letters to the shareholders – which are like lectures for investors – and are publicly available on Berkshire’s website.
You can read books, listen to podcasts or even take a course in value investing.
If you are feeling unsteady in your conviction, it might be that you lack some knowledge.
If you want to learn how I invest and calculate the value of companies, you are welcome to download my free e-book here.