I saw a headline the other day about the fear of missing out (FOMO) driving Bitcoin last year. That got me to thinking: can FOMO ever be a valid reason for speculating? After all, we’re speculators, not held back by the über-risk-aversion of the likes of Warren Buffett…
In a word: no.
Successful speculators are not wild gamblers. Just the opposite. As explained in my Speculation 101 report, we do everything we can to reduce risk in our speculations.
FOMO is bad enough for regular investors. But at least in many mainstream investments, a bad call can be reversed without too much permanent loss of capital.
For speculators like us, FOMO is pure poison.
Our stocks are typically highly volatile. That’s expected, and indeed used to our advantage. But it also means that buying when something has “gone vertical” exposes us to a high risk of major losses should the spike reverse—as most true spikes do.
So I thought of another way of putting it. For speculators:
It’s better to miss a train than to get on the wrong train.
Because of the nature of what we do, the “wrong” train is one that can go completely off the rails. And while there are some “right” trains that will never run again if we miss them, there is always another train. Rushing and jumping on the wrong train is inviting disaster. Taking your time with your due diligence and only boarding when you’ve done everything possible to make sure a train is headed where you want to go is always the right choice.
Don’t worry. The universe will never run out of opportunities to speculate.