Investor’s mindset - FOBO and FOMO
Greed and Fear, are the two state of mind that drive
Investors behaviour!! It’s just this two factors that are responsible for all
your action!! Even if you are passive investor, either of this is still working.
Think about it😊 .
If you have invested, and reading opinions that the markets are likely to fall
and still don’t redeem money, its fear that’s working on your mind i.e. what if
I redeem and market goes up? And if you add more in investments, its greed
that’s working on your mind. i.e. what if I miss out investing now and market
goes up!!
I will introduce you to two words in investing and explain
both in detail. FOBO and FOMO.
Feeling Of Better
Option/Opportunity (FOBO)
Investors feel that there could be another opportunity which
is going to be better than current!!
Such investors carry a feeling of being a hunter or gambler
who think to outsmart market and make killer investments. To explain – If market
has corrected quite a bit but such investors wait on fences for market to
correct further. Such investors waste time and energy in search of the answer
of best time to invest. Eventually such investors miss the bus and stay waiting.
What such Investors do is coming up in next Investor mindset- FOMO.
Fear Of Missing
Out (FOMO)
After having trapped in FOBO, such investors find themselves
caught up in FOMO.
Fear of missing out occurs when unpredictable markets turn
positive and start to gather momentum. Investor who was waiting to invest at
the bottom of market, finds himself in despair!!
Fear of missing out triggers him to invest at rising levels.
End result, same investor who was waiting for bottom fishing ends up buying at
expensive levels.
Same behaviour applies while redeeming or selling also. At
the peak Investor waits for some more upside and resists to sell/redeem and
later when market falls, he exits at much lesser valuation than before!!
Attached picture gives you an idea of what emotions an
investor goes thru!!
The markets are
unpredictable and therefore how much fall is in store and where the bottom is, are
the most frequently asked question which has no definite answer👍 .
The answer was not available earlier and will not be available tomorrow also. It’s
such a waste of time but most are happy doing it.
Current fall and rise in market must have manifested this
behaviour of most investors 👍.
What should Investor do in such times? Investor must realize
that he needs to listen to his advisor before taking any decision or forming an
opinion on the market. If you have advisor, it’s safe to assume that he/she
will know more than you or your friends. Advisor will also be responsible for
his/her advise whereas friend will not be.
At the beginning of
March 2020, we reached out to many of our investors and asked them to
re-shuffle portfolios. We did saved 15-30% of downfall in folios and also
capturing lower NAV in reinvesting journey😊.
We do it and feel pride of having done our duty in client’s interest, that’s
(one of the many reason) why a client is happy dealing with us only.
FOBO and FOMO makes
you inefficient in decision making as personal biases plus emotions come in way
in rational decision making. Listen to your advisor. If you think your advisor
is not efficient enough, pls look for another credible person. Do this 🙏 its in your best interest.
In case you are stuck on what to do and how to do? Please feel free to
speak to me on 9833778887 or write to me at wealthcarein@gmail.com. I
will be happy to help you without obligation.
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comment
Author –
Bhavesh
D Damania
Founder
- Wealthcare Investments
EduPrenuer,
TV show panellist and Blogger
"Risk comes until you know what, where and why you are
Investing"
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