Fear of Missing Out is not a sound investment philosophy
The Securities and Exchange Commission has created Investor.gov, a useful resource for the investing public prepared in ordinary, nonlegal, and nontechnical language. The website includes financial tools and calculators, as well as articles of general interest for investors.
The “Director’s Take” is a collection of such articles by Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. One recent rumination is “Say No Go to FOMO.” FOMO is the Fear of Missing Out, which has been the driver of certain crazes. We’ve witnessed an increase in investing fads recently.
These include cryptocurrencies, meme stocks (propelled by social media), and non-fungible tokens. The SEC isn’t about to forbid investing in these sorts of things, but they are warning against getting caught up in the emotions of investing in them, in surrendering to the fear of missing out on the next big thing. “You may see your favorite 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.”
But there are three things that everyone should not miss out on, according to Ms. Schock:
- Paying off credit cards, because the interest rate on credit card debt is typically much higher than the return on most investments.
- Saving as much as possible as early as possible to take full advantage of the miracle of compound interest.
- Grabbing free money by deferring enough in a company retirement plan, such as a 401(k) plan, to qualify for the maximum company match. If the employer has a 50% match, for example, that’s a guaranteed 50% return on investment in the first year – no ordinary investment is going to beat that.
© 2022 M.A. Co. All rights reserved.
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