Stock Market FOMO (Fear of Missing Out) #illumedati 4


So there has been some volatility in the stock market recently since Trump is now President-Elect, which I wrote about here:

President Elect Trump and the Stock Market

I have some colleagues at work who I talk to about the stock market and it’s kind of fun to speculate…

Stock Photo from: Pexels

So tell me about Stock Market FOMO (Fear of Missing Out)

Now, I’m going to do something that I never do. I’m going to talk about what the stock market is doing, and even some *gasp* speculation. These are both things I advise everyone on my blog not to do. It shouldn’t matter what the stock market is doing right now… remember? That said, I just wanted people to know that I am aware of what goes in the stock market, even if I don’t care.

Ok, so there was a volatile few days after his election. However, things kind of stabilized and now we’re beginning to see optimism in the stock market. Obviously, Trump is pro-business since he’s made (and lost)  millions of dollars over the course of his career (so far). For that reason, you can understand the optimism.

Trumponomics suddenly gets big Wall Street thumbs up – CNN Money

Here’s the thing… nobody knows what is going to happen, or how China will react. There are so many variables that there are variables for the variables (variableception!) It makes sense to me that the stock market will see a rise because of the optimism surrounding Trumponomics.

However, there will likely also be a fall. When will it happen? Who knows. It may be a cliff and crash like 2008, or it may be a slow descent with a correction.

When will you buy? Now? You would already be way behind the crowd.

When will you sell? At the top? Or at the bottom?


Do you know who “wins” either way?

The person who bought stock 10 years ago, or 20 years ago, or 30 years ago… of course. But also, the person who doesn’t care about where the stock market is and continues to put away money whether the stock market is up or down, sideways or diagonal, upside down, or inside out.

Here’s how to think about things:

The stock market is up:

Great, the money in my 401k/403b, 457 and IRA is growing nicely.

I’m still going to put money toward my 401k/403b, 457 and IRA like clockwork.

The stock market is down:

Great, now I can buy more stocks.

I’m still going to put money toward my 401k/403b, 457 and IRA like clockwork.


See?

When it’s down, you’re still winning because you know it’ll eventually be up. And when it’s up, the money you put in prior to it being up will be doing well.

What’s the biggest problem with this?

It’s boring. 

All of your friends want to talk stocks and you want to talk too! Your friend John is putting more money into tech and pulling away from oil because he believes that alternative energy is the future. However, Brad is doing the opposite because he thinks oil will still be the thing for at least 5 more years. Then there is Angela who says that now is the time to buy gold. etc. etc.

As for you… you want to say something, you want do something… you don’t want to MISS OUT.


I’m not convinced.

Ok, well a friend of mine linked me this post from reddit:

Made small “fortune” twice trading options…lost it all both times. Time to move on? – Reddit

I’ll save you some time and paraphrase. Essentially the OP made $2500 into $100k, from January to December and then lost it all. Then he turned $15k into $250k from February to December, and lost it all again in 2 months. Now, here’s the thing I think people might miss. The OP believes he lost $350k. In reality, he only really only lost $17.5k of his money. The rest of it was the money that his money made.

Now, $17500 isn’t pennies… but it certainly isn’t $350,000. However, the OP will always consider that $350k to be “his”. He spent all this time from Jan-Dec and Feb-December “working” to acquire it.

However, in reality, he was just gambling.

There is actually some good advice in the thread, which I will highlight here:

“tl;dr: Don’t invest anything you aren’t prepared to lose. You may lose it ALL, including the money.” – papabois

‘”You have to want to win more than you want to play.'” – zaffudo (quoting his gambler friend)

“What you do is gambling. My advice: stop.” – lutz81


Gambling?

Yes. Gambling. Make no mistake, trying to time the stock market is straight up gambling. If you want do try to do that, then you need to understand that it is gambling. Like I’ve said before, would you go to Las Vegas and drop $100k on the roulette table and then spin? Some of you maybe would, but I hope that is not the majority. Only gamble what you are prepared to lose. 

Let me illustrate another point. When people come back from Las Vegas, they say:

“Oh yea, I did awesome, I won a few hundred (or thousand) dollars.”  —> Translation: I’m up a little.

“I guess I’m about even.” —-> Translation: I lost a little.

“I’m down.” —> Translation: I lost a lot.

“I don’t want to talk about it.” —> Translation: This shirt I’m wearing isn’t mine, because I lost it in Vegas.


No one likes to talk about losing. 

It’s the same for the stock market. Your friends and colleagues will always talk about the time they made $20k shorting XYZ in 4 hours, but they won’t tell you they lost $100k over the last 5 years… and they probably have no idea how much it is costing them to make the trades.

Why Does the House Always Win? A Look at Casino Profitability – Investopedia

Wait a second… that’s about casino house rules… that doesn’t apply to the stock market!

Hmm… are you sure?

The “House Edge” of 0.5% seems similar to having pay a fee everytime you trade stocks.

“Player Lose More Than They Expect” because you are probably making a lot more trades than you are aware of (and probably not keeping track of the total you have to pay).

“The Extra House Edge” dictates that “In the short term, a player may well be ahead; over the long haul, the house edge will eventually grind the player down into unprofitability.” This sounds very, very similar to a person’s inability to time the market consistently.

It’s Gambling and (eventually) The House Always Wins.

So let me ease your fears. The only thing you are missing out on… is LOSING MONEY.


When people talk about stocks around you… just think to yourself:

“Stay the course.” and “Don’t do something, just stand there!”

And if anyone asked you about what you think about the stock market, just say:

“I don’t think about the stock market.”

When it comes to the stock market, your goal is to have nothing to say for 30 years.


Wait a second… that’s the end of the post? Isn’t this the same stuff you always say?

Yup. However, it is the single most important piece of financial advice I can provide. Getting people to learn about index funds and use them isn’t too difficult. It makes sense. However, getting people to stick with them and not move around their money is exponentially more difficult. Everyone wants to make a little extra money and eventually everyone thinks they have a system and can time the market.

We need a constant reminder that no matter how smart we think we are, there is probably somewhat smarter… and even that person can’t time the market on a consistent basis. 


TL;DR

FOMO (Fear Of Missing Out) is a real thing.

However, have no fear, you are only missing out on losing money.

“Stay the course.”

“Don’t do something, just stand there!”

“I don’t think about the stock market.”

 

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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