Fear of missing out can be a killer for investors. Here's how top-ranked advisors keep it at bay

The fearfulness of missing out, oregon FOMO, tin beryllium a almighty intelligence unit — and it whitethorn pb unwary investors to suffer bundles of money, according to fiscal advisors.

A radical of British psychologists defined FOMO arsenic a fearfulness "that others mightiness beryllium having rewarding experiences from which 1 is absent." Financial advisor Josh Brown uses the word "animal spirits" to picture the conception of investors allowing their emotions to usher them.

These days, societal media platforms are a large root of FOMO, bombarding users with messages astir "hot" investments specified arsenic cryptocurrency, meme stocks and peculiar intent acquisition companies, oregon SPACs. The influencers and experts touting specified assets assertion buyers tin gain bundles of money, but they whitethorn gloss implicit the risks oregon fail to disclose their ain motivations.

This isn't to accidental flavor-of-the-day investments ever crook retired to beryllium flops for buyers, depending connected erstwhile they bargain and sell. Problem is: Investors often lone perceive astir the large winners, not the duds, advisors and experts said.

Controlling FOMO "is astir apt the astir important fiscal accomplishment these days, successful the societal media era," Morgan Housel, writer of "The Psychology of Money," said successful September astatine the Future Proof wealthiness league successful Huntington Beach, California.

It's mostly much prudent to "get affluent slowly," since investments that connection immense maturation imaginable besides thin to transportation much hazard and truthful bigger likelihood of loss, said Joseph Bert, a certified fiscal planner who serves arsenic president and CEO of Certified Financial Group.

"People effort to deed the location run, which is similar [winning] the lottery successful investing," said Bert, whose firm, based successful Altamonte Springs, Florida, ranked No. 95 connected the 2022 CNBC Financial Advisor 100 list.

It was comparatively casual for investors to marque wealth successful 2021, a twelvemonth erstwhile astir plus classes seemed to caput obscurity but up. Strong banal and crypto gains minted a cardinal caller millionaires.

Various hype-men and -women and societal media communities helped nudge investors to bargain successful past year.  

For example, bitcoin prices could soar by 20% oregon much successful a day pursuing a azygous tweet from Tesla and SpaceX laminitis Elon Musk; 1 February 2021 tweet imbued dogecoin, different cryptocurrency, with a benignant of everyman quality, calling it "the people's crypto."

The WallStreetBets assemblage connected Reddit besides fed a frenzy successful meme stocks specified arsenic GameStop and AMC. Rapper and euphony shaper Jay-Z, NBA subordinate Steph Curry, tennis phenom Serena Williams and different celebrities have besides endorsed definite SPACs — investments that are quasi-initial nationalist offerings — and were, until recently, one of Wall Street's hottest trends.

Depending connected erstwhile investors bought successful and sold, FOMO may person outgo them large bucks.

The terms of bitcoin, for example, topped retired adjacent $69,000 successful November 2021, much than tripling successful a year. Since then, it's cratered to astir $19,000, astir level with prices earlier its melodramatic runup. Extreme volatility successful GameStop banal saw stock prices sometimes fall 40% successful the span of a fractional hour.

The Securities and Exchange Commission past twelvemonth issued an investor alert astir celebrity-backed SPACs.

"Celebrities, similar anyone else, tin beryllium lured into participating successful a risky concern oregon whitethorn beryllium amended capable to prolong the hazard of loss," the SEC said. "It is ne'er a bully thought to put successful a SPAC conscionable due to the fact that idiosyncratic celebrated sponsors oregon invests successful it oregon says it is simply a bully investment."

A CNBC scale tracking SPAC deals is down much than 60% successful the past year.

"I deliberation precise fewer radical recognize their hazard tolerance and consciousness of aboriginal regret until things spell south," said Housel, who added that everyone has precocious hazard tolerance successful a bull market.

Playing disconnected that aboriginal regret is however apical fiscal advisors effort to dissuade investors from succumbing to FOMO.

If a lawsuit wants to displacement a batch of wealth into a "FOMO asset," said Aldo Vultaggio, main concern serviceman astatine Capstone Financial Advisors, helium likes to sermon with them their probability of occurrence reaching definite fiscal goals with and without those assets. The firm, based successful Downers Grove, Illinois, ranked No. 77 connected CNBC's Financial Advisor 100 list.

In different words, if a lawsuit is already connected gait to person capable wealth to discontinue comfortably oregon to spend a kid's assemblage education, wherefore instrumentality much risk?

The fearfulness of aboriginal nonaccomplishment helps dissuade clients from making the short-term concern — oregon astatine slightest trim their wide allocation to it.

"Why put successful these speculative assets? They mostly privation to bash that due to the fact that they could perchance gain a higher return," said Vultaggio. "But if you don't request to bash that, wherefore would you bash it?"

"The vessel is connected people for occurrence here," helium added. "We privation to debar thing that could instrumentality you disconnected course."

Vultaggio tells clients who are adamant astir holding a FOMO-type allocation to a risky plus that they should mostly bounds their presumption to a low-single-digit percent of their wide holdings and they shouldn't put with wealth they'll request successful the adjacent oregon intermediate term, helium said.

Investing successful stocks, bonds and different plus classes ever carries immoderate hazard — but it's a calculated hazard that mostly has a humanities way grounds of occurrence implicit agelong clip periods, said Madeline Maloon, a fiscal advisor astatine California Financial Advisors, a steadfast based successful San Ramon, California, that ranked No. 27 connected the CNBC Financial Advisor 100 list.

"We request thing we person a crippled program for, whereas these blistery stocks, crypto, immoderate it whitethorn be, [clients] person to cognize this is their gambling money," Maloon said. "This is not what we privation to trust connected for retirement."