Key idea
When everyone is making money and you feel left out, the urge to jump in is strongest, and it is usually the worst moment to do so.
FOMO, the fear of missing out, is what pulls investors into an asset after it has already soared. The news is full of gains, friends are boasting, and staying out feels foolish. So you buy, near the peak, precisely when the risk is highest and the future returns are lowest.
The cruel timing of FOMO
By the time an asset is on every headline and everyone is talking about it, most of its rise has usually already happened. The people crowing about gains bought earlier, at lower prices. Joining late means paying top prices for yesterday's returns, and being most exposed if the rally reverses.
Hype peaks
after the rise
You buy
near the top
Return ahead
is now lowest
The defence
The antidote to FOMO is a plan you set in calm times and follow in loud ones. A steady SIP into a sensible allocation ignores the noise entirely: it keeps investing the same amount whether the crowd is euphoric or absent. If an "opportunity" is being shouted from every rooftop, that is a reason for caution, not haste.
The best returns are usually earned by those already invested before the crowd arrives, not by those who rush in at the peak. When FOMO strikes, your plan, not the headlines, should decide.
Finished reading?
Marking this complete counts today, and your streak becomes day 1.