Knowing how to behave when we are faced with uncertainly can help stop us making expensive mistakes.

The beginning of 2022 was not kind to the stock market, so many of us might be thinking about how well our invests are doing. Likewise, you’ve probably heard of a stock or cryptocurrency that has gone on a ridiculous run (GameStop anyone) and you’ve kicked yourself for not investing.

Hindsight is a wonderful thing. Knowing what I know now, I would have purchased as many shares as I could of Amazon or Apple back in the early 2000s. However, capitalizing on every opportunity is simply impossible. If we think about all the hypothetical returns we missed out on, we'd spend an eternity in depression. Worse, it creates a sense of FOMO (Fear Of Missing Out) that may lead us to chase the next ever-elusive "hot" stock or investment trend with disastrous results.

Where Does FOMO Come From?

The concept of FOMO is partially associated with the social anxiety that results from watching other people's lives on social media. We all have those friends on Facebook or Instagram who seem to pack in an exotic vacation every other week. It’s hard not to feel like you’ve missed out on some similar experience.

From an economic perspective, FOMO is a psychological phenomenon associated with loss aversion, particularly in terms of financial decision-making. According to Huffington Post:

In behavioral economics, and decision theory, the psychology behind FOMO can be partially explained by loss aversion. Amos Tversky and Daniel Kahneman demonstrated people's strong tendency to want to avoid any losses. In fact, the research suggests that losses are twice as impactful on people, psychologically, as gains. This leads to risk aversion; we just hate to lose out on anything.

Hating to lose out on anything can inadvertently lead to trying to get a stake in everything, increasing the risk of investing in hyped-up stocks and trends for fear of missing out on a potentially big payoff rather than for legitimate value.

We need to avoid this at all costs. Here are a few actionable steps to take to avoid acting purely due to the fear of missing out.

Start with Goals in Mind

A good sprinter keeps their eyes on the finish line. You figure out where you want to be and reverse engineer things to get there. Think about the following and use them to personalize a goal for yourself:

• Where do you see yourself in 5 years?
• Do you plan on retiring early or do you plan on gradually retiring?
• How much income are you looking for each month to fund the lifestyle you want?

Once you have some goals, you can work on making them a reality.

Create a Strategy

Have you created an investment plan? It doesn't have to be long or complicated, but it should detail your investment goals, strategy, allocation, and timeline. You hold yourself to this plan and don't deviate from it except for extreme circumstances (hint, a stock market drop is not one of them).

Personally, my strategy is focused on investing as much money as I can per month. Every week I force myself to transfer money from my checking account to my investment accounts so that is has become a habitual routine. Thinking about how much you have to save over a year in a lump sum might seem daunting, but depositing money weekly or monthly can be much less stressful to think abou.t

Be Wary of Snake Oil

Successful investing is all about knowing how to decipher data and come up with the right conclusion before others do. Analysts at banks spend all their time on this. Once information about a hot stock is online, you’re the last person getting in on it, so it's too late. Ask yourself why you want to invest in this hot thing? Chances are your reasoning won't stand up to scruntiny and you better off staying clear.

Make sure you always do your own due diligence. Don't invest based on the advice of random people, your friends, pundits and stock pickers on TV and investment websites. Their interests are rarely aligned with yours; many are paid to sell advertising and products, not to give you good advice. Always do research on what you are about to invest in.

Realize That You Never See the Full Picture of Other People’s Investments

You may hear from a friend that they crushed it with a certain investment. But you never know what happens next. You also don’t know what losses they’ve incurred in the past. Don't blindly follow what other people do because you don't really know how well any of their strategies actually worked. Instead, use what they do as a starting point and try to figure out for yourself it seems like a reasonable, stable, long term investment strategy.

Focus on the Long-Term

Serious investors know that investing for wealth is a marathon, not a sprint. You won’t hear me talking about get-rich-quick schemes.

Focus on the long term, not the minute-to-minute. Doing the latter will drive you bonkers. Plus, you probably don’t have the time to micro-manage every single investment.

Do you had a hard time avoiding FOMO? Have you found it easy to stay the course?