This is what FOMO feels like
Fear of Missing Out
Meet Tom, your smart friend
Imagine your best friend in his mid 20s working as a consultant in McKonsey. His name is Tom and he is incredibly intelligent. He analyzes industries and businesses with a snap of his fingers. He frequently goes out to have client dinners and often talks about unique insights about oil and gas, coal, commodities and many interesting points about his clients from various industries.
Now Tom, with all his intellectual background, comes to you, sits you down and talks about the best in class asset that humans have ever created: BotCion.
Yes, he’s that broken radio that chimes in with the sudden surge of popularity for BotCion. I mean, come on. You can see that in a relatively short period of time, the price has gone up from $70k to $100k.
And the thing is, Tom kept rambling about BotCion going to $300k. All his reasoning makes perfect sense. BotCion market cap (”I initially don’t even know what market cap means but apparently it only refers to the amount of coin in circulation multiplied by price per coin.”) is only equivalent to 1% of cash in circulation in this world today (or something like that). That’s punily little. Imagine if that goes up to just 3%. The price would go up to $300k easy.
Best of all, the supply of BotCion is limited!! It is sound money folks, everybody is going to be using it 100% for sure. Legal tender is so 20th century.
Should I Buy BotCion?
You initially feel that that this whole thing is nonsense. But amidst sifting all the jibber Tom had said earlier with all his conviction, you start to be curious.
You start to monitor the price of BotCion on a daily basis. You see it going up again to $101k the next day. The next day it became $102k. The subsequent day it shot up!! to $105k.
You start noticing your colleagues at work are crying “oh my I am so rich now, I bought BotCion when it was priced $50k. I have more than doubled my money!!”.
Looking at how BotCion has gone up super rapidly these days, there is absolutely no reason why BotCion could not hit its target price of $300k.
You have little to no idea about the fundamentals. All you know is that there is a limited supply of BotCion and everybody seems to want it. But at least, every time you are curious about its fundamentals, Tom is your guy to ask.
Okay let me buy some BotCion now and I am locked in and convicted that BotCion will go up to $300k.
So I purchase BotCion at $105k. Finally, “I am in position and I am ready to get rich” I said to myself.
Without the slightest beat, BotCion price goes up again!! Now to $110k. Great gains, but this is just the appetizer. This is nothing compared to what was told. So I keep checking on the price of BotCion and I can’t help to think to myself, when is BotCion going to reach the price of $300k??
In a couple of days, BotCion kept going up to $150k! That’s craaazy. My investments more or less shot up by 50% in a couple of days. Never have I in my life “made money” this easy, this is surreal.
The Wake Up Call from Tom
Tom called and he was saying to me: “Are you ready to lead a rich life style brother??” I was hyped, but I asked myself, have I bought enough BotCion? No I don’t think. I just bought in a little bit at the start. The 50% gains is not going to make me rich unfortunately.
You know what, let me buy more BotCion. It is going to $300k anyways. I will quickly cash out once it hits that target price.
I am going to liquidate ALL my holiday funds and put it to BotCion. So I did that and bought more at $150k. It went up again to $180k and I totally feel like the best investor ever lived. All those legendary value investors are stupid. Why bother analysing companies and looking into financial statements? Just buy BotCion.
Btw, I can’t work and I can’t focus. All I can think of is me getting rich because BotCion will reach the price of $300k as told by all of my friends.
One day, checked the price of BotCion and price went down to $150k. Easy peasy that’s okay. Small price decline is not a big deal and it is completely expected. Eyes on the prize, $300k is happening. Tom was telling me that he has Diamond hands and he is holding on to his BotCion super strongly. He would never sell BotCion until it reaches $500k now. That small correction was just a fluke and a temporary event.
Then BotCion price went up to $160k. Pheww.. Okay we are back on track. Let’s get to $300k finally.
You had to go to the office the next day because there’s no more flu virus that’s lethal. After a day of working hard, you forgot to check the price on that day. Then you woke up to Tom texting you that price of BotCion has gone down to $80k.
What? What should I do now? I have put ALL of my vacation money into BotCion..
Okay let’s wait. Maybe the price will bounce back. I’ll sell at $100k.
One day later. Nope price continues to plummet to $60k.
I have no idea what I should do now. Maybe I will have to cancel my trip or borrow money from pinjol so that my travel plans goes undisturbed..
The story ends here
Closing Remarks
From our experience that is what FOMO feels like. We believe that FOMO actually feels very natural precisely because it is baked in into your human primal instinct: greed.
It is incredibly counterintuitive to say to Tom at the start that buying BotCion is not a good idea. You never believed that BotCion will go down in value from $150k straight to $80k in a couple of days after seeing:
the gains
and after imagining:
you being rich because of BotCion’s price action in the short run
However, we also believe that this is not the ideal way of investing as investing in this manner is very risky. Not only you are exposing yourself to an enormous risk of price decrease. But you being unaware that you are FOMOing (or being greedy) becomes the main reason for you to use other funds that are not intended to be invested in the first place (such as your holiday or emergency funds).
We have seen countless of people falling into the FOMO trap day in day out and we and our family even have committed to FOMO numerous times in the past. It is super hard to recover once your investment greed do not go as planned, which happens most of the time.
That is why, we work tirelessly to make sure that every single investments that we make have a concrete investment thesis that is backed by sound fundamental analysis. With this in mind, we think that we won’t easily FOMO into any opportunity that is presented to us.