By Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy

At some point we’ve all felt FOMO. Whether it involves trying to get a reservation at the trendiest new restaurant or the hottest ticket on Broadway, everyone has experienced some kind of fear of missing out on something. While it may be hard to curb this feeling in most instances, one place you should consider using your strongest willpower is when you’re making decisions on investment opportunities. As you make investment decisions keep this phrase in mind, “NO GO to FOMO.”

Trends and Influencers

We’ve all seen the increased interest in online investing and the explosion of digital assets and meme stocks. Understanding these kinds of investments may seem overwhelming. Digital assets include crypto-currencies, coins and tokens like those offered in initial coin offerings (ICOs). Meme stocks may be based on internet popularity and social views, instead of a traditional stock value, such as a company’s performance. And, let’s not forget about NFTs (non-fungible tokens). An NFT has a unique code that allows it to be identified as something that can be digitally-owned. It’s found on a blockchain, which is a kind of digital ledger. Think of NFTs as digital ownership of something like art work, sports memorabilia, photos, etc.

You may see your favourite athlete, entertainer or social media influencer promoting these kinds of investment opportunities. Although it’s tempting, never make a decision to invest based solely on their recommendation.

And, just because others around you might be buying into these kinds of opportunities, it doesn’t mean you have to. Not every investment opportunity is right for everyone. Resist temptation and remember our phrase, “NO GO to FOMO.”

Market Swings

Buying and selling investments along with trends and influencers because of a fear of missing out isn’t the best way to plan for a strong financial future. Market swings are inevitable. And as we have seen, many trendy investments can experience a lot of volatility. We’ve seen high highs and low lows. These kinds of investments may be appealing at first, but once the novelty wears off some investors may decide to move on to something else, which may cause the investment to take a significant downturn. How would you feel if your investment lost 20, 30, or even 50 percent in a single day?

The best way to protect yourself during market swings is to create an investment portfolio that has a mix of assets, such as stock, bonds and cash. Including different kinds of assets in your portfolio reduces risk and the impact of volatility on your overall portfolio.

It’s also important to diversify within an asset class, such as not putting all of your money in one or two stocks. Instead, spread it across different industry sectors. That way, if you want to dabble in a “cutting edge” investment that may experience a lot of volatility, you might be better protected against a downturn. Our phrase, “NO GO to FOMO” even applies to trying to time the market. It’s time in the market that counts, not timing the market.

What Should You Fear Missing Out On?

Planning for your financial future. If you haven’t yet created a saving and investment plan, do it right away. Identify your goals and put together a long-term investment plan that meets those goals. Investor.gov has everything you need to get started with its free financial planning tools and resources.

Paying off credit cards or other high interest debt is also something you should work into your plan. Typically, no investment will give you returns that will match high, double-digit interest rates. Getting rid of that debt is a guaranteed return on money you can always count on.

You also don’t want to miss out on the power of compounding. Compound interest allows you to earn interest on the money you save and on the interest that money earns. You can watch your money grow over time even if you only put a small amount of money into savings right now. The earlier you start, the more money you’re likely to have in the long run.

And last but certainly not least, you don’t want to miss out on free money. If you’re not doing so already, be sure to participate in your company’s 401(k) plan and max out any employer match. It’s simple. If your employer contributes 50 cents for every dollar you save, that’s an immediate 50 percent return. No other investment will give you that kind of guaranteed return.

Willpower

While FOMO may always be a part of our lives, it doesn’t have to control your life. Use your strongest willpower to steer clear of it. Say “NO GO to FOMO”−stick with your long-term plan and don’t make investment decisions based on a fear of missing out.

Note: Director’s Take articles are written in a short, non-legalese format intended to provide you with tips and information on timely investment topics that are important to you. You can subscribe to receive Director’s Take articles or find our latest article on the Director’s Take spotlight page.

The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This article expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.