FOMO – Okay for dogs, disastrous for investors

Charnelle and I joke that our dog Nala has a bad case of FOMO – Fear Of Missing Out. She always wants to be in the middle of the action. If we are so cruel as to leave her downstairs when we have company, she lets us hear it. Never mind that she was perfectly content sleeping downstairs just minutes before the company arrived.

I have seen plenty of investors with the same problem. They hear a party is going on and they want to be a part of it. Let’s use marijuana stocks as an example. Recreational and medical use of marijuana is sweeping across the nation and already hit Canada. There is a big market opening up for marijuana production and sales. Everyone wants in on the party, which means a lot of money flooded to the companies in this industry.

This means we have a lot of excitement, very high stock valuations, and no profits to show for it. Can you guess how this is going to work out? The sizzle will fade, few will be rich, and many will have lost a lot of money. Actually…many already have lost a lot of money. The marijuana stock industry is down around 50% over the past year alone.

The next time you get excited about investing in something everyone is talking about, stop to determine if it’s your fear of missing out that’s driving your interest. If so, call me. Nala and I are up for a party.

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