FOMO vs. Steady Growth: Why Quick Money Won’t Grow

Quick Recap: In our post “Get Your Money to Bloom This Spring”, we introduced the idea that sustainable wealth comes from patient investing, regular contributions, and protecting your growth. Now let’s dive deeper into why steady growth beats chasing quick money, and how to overcome the powerful FOMO feeling that leads many investors astray.

Have you ever felt that twinge of regret when you see a social media post about someone’s amazing luxury trip or the house they’re living in? Or maybe how much they made on Bitcoin or some hot stock? That feeling has a name: FOMO – the Fear Of Missing Out. And when it comes to investing, it might be the most expensive emotion you’ll ever experience.

While social media feeds are filled with overnight success stories, they rarely show the other side: people who lost everything chasing a get-rich-quick dream. Let’s explore why steady growth beats quick money almost every time, and how you can build a FOMO-resistant investment mindset.

The Psychology of Investment FOMO 🧠

FOMO isn’t just about feeling left out, it triggers powerful psychological responses:

• Your brain releases stress hormones when you think you’re missing opportunities
• You start making decisions based on emotions rather than facts
• You focus on potential gains while ignoring massive risks
• You overestimate how common “overnight success” actually is

Benjamin Graham, the father of value investing, wrote in his classic book “The Intelligent Investor” the following quote that has now become famous: “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Behavioral finance expert Dr. Daniel Crosby echoes this in his book “The Behavioral Investor,” noting that our emotional biases often lead us to make poor investment decisions. Our natural tendencies work against us when it comes to investing, pushing us toward action when patience would serve us better.

Why Quick Money Strategies Usually Fail 📉

Think about the last big investment craze you heard about. By the time most people learn about it, the opportunity for significant gains has likely passed. Here’s why chasing quick money typically leads to losses:

The Timing Problem

Most people buy trendy investments near their peak and sell in a panic when they drop. According to Dalbar’s “Quantitative Analysis of Investor Behavior” study, an investor who remained fully invested in the S&P 500 Index between 1995 and 2014 would have earned a 9.85% annualized return.

However, if they missed just 10 of the best market days during that period, their return would have plummeted to only 5.1%. Ironically, some of the biggest upswings in the market occur during volatile periods when many investors flee the market in panic.

The Knowledge Gap

Quick-money schemes often involve complex assets or strategies that most people don’t fully understand. As legendary investor Peter Lynch said, “Know what you own, and know why you own it.” With trendy investments, most people can’t explain either.

When you don’t understand what you’re investing in, you can’t properly assess risk or recognize warning signs. You’re also more likely to panic-sell during market fluctuations because you have no framework for evaluating whether temporary drops are normal or truly concerning.

Warren Buffett similarly advised to “never invest in a business you cannot understand.” This doesn’t mean you need a finance degree, but you should be able to explain in simple terms what the company or asset does, how it makes money, and why you believe it has lasting value.

The Mathematics of Recovery

If an investment drops 50% (which happens frequently with volatile assets), you need a 100% gain just to break even.

This is why chasing volatile, trendy investments can be so destructive to your wealth. During the 2021-2022 cryptocurrency crash, many coins lost over 70% of their value. For investors who bought at the peak, their investments would need to more than triple just to get back to their starting point.

Even worse, after experiencing a significant loss, many investors become risk-averse exactly when they should be looking for opportunities, or they chase even riskier investments trying to “make back” their losses quickly. This behavior often leads to a destructive cycle of bigger losses.

The Power of Boring Money 💪

Meanwhile, “boring” investing consistently outperforms trend-chasing over time. Consider these real-world examples:

The Coffee Investment

If you had invested €10 per week (the cost of two nice coffees) in a basic market index fund since 2000, you’d have put in about €12,000 total. Today, that investment would be worth over €25,000 – and that’s even if you include major market downturns.

The Tale of the Tortoise Investors

Research by Morningstar in their annual “Mind the Gap” study consistently shows that investors who trade less frequently outperform those who frequently buy and sell. In their 2022 study, they found that the average investor earned about 1.7% less per year than the funds they invested in, mainly due to poorly timed buying and selling.

For context, that gap means investors would have about 17% less money after 10 years compared to if they had simply bought and held their investments. This performance gap has remained remarkably consistent over time, showing similar shortfalls in the 10-year periods ending in 2018, 2019, 2020, and 2021, confirming that timing costs are a persistent drag on investor returns.

The Cost of Emotional Trading

A landmark study by Professors Brad Barber and Terrance Odean examined the trading records of over 66,000 households from a major discount brokerage. Their findings were striking: the most active traders earned annual returns of 11.4%, while the market returned 17.9% during the same period.

The main conclusion? The more frequently investors traded, the worse they performed.

This research showed that investors who constantly reacted to market news, sought “hot” opportunities, and frequently changed their holdings dramatically underperformed those who traded less frequently. The researchers attributed this largely to overconfidence and the emotional impulse to “do something” rather than stay the course.

The study highlights a crucial lesson: emotional trading decisions driven by market excitement or panic typically hurt returns. A patient, consistent approach focusing on quality investments rather than constantly chasing the next big thing generally provides better results over time.

Building Your FOMO-Resistant Mindset 🛡️

So after learning about the dangers of FOMO, how exactly do you protect yourself from expensive, emotional decisions? Try these practical strategies:

1. Create a waiting period rule
Before making any investment, give yourself a mandatory 48-hour waiting period, no matter what. This cooling-off time helps your rational brain catch up with your emotional impulses.

2. Ask the “reverse question”
Instead of “How much could I make if this goes up?”, ask yourself “How much would I lose if this drops 50%? Can I afford that loss?”

3. Focus on process, not outcomes
Develop a simple investment process and stick to it. Create rules for when you’ll invest, how much, and under what conditions you might adjust your approach. This takes emotion out of the equation and helps you stay consistent even when markets get turbulent.

4. Find an accountability partner
Once you’ve got a solid investment plan, share it with a trusted friend or family member, and ask them to question you if you ever suddenly want to change course.

Getting Started with Consistent Investing 🌱

Ready to start growing steadily instead of chasing quick wins? Here’s how:

1. Start with what you can afford, even if it’s just €10 a week
2. Set up automatic investing so you don’t have to make repeated decisions
3. Choose a diversified portfolio that matches your risk tolerance
4. Ignore financial news that encourages quick action
5. Track progress quarterly, not daily to avoid overreacting to normal market movements

With Beewise, you can set up a regular investment plan in minutes. Choose a portfolio that matches your goals, decide on an amount you can commit to regularly, and let time work its magic. Find out how Beewise works!

The Bottom Line

When it comes to investing, slow and steady really does win the race. While FOMO-driven decisions might occasionally pay off, consistent, patient investing builds real wealth for most people.

As investment pioneer John Bogle put it: “The greatest enemy of a good plan is the dream of a perfect plan.” Don’t let the perfect (or trending) investment be the enemy of a good, steady investment strategy.

Ready to start growing your money the patient way? Download Beewise, set up your first investment goal, and take the first step toward sustainable wealth building.

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