The Investor's Journey from FOMO to JOMO

Just a year back, Indian investors were salivating over unicorn startups that were peaking with record number valuations and news-worthy funding. Cryptocurrency was everywhere, minting millionaires out of teenage gamers and internet meme enthusiasts. I was curious -- were investors paying attention to how these investments fit their portfolio profiles and interests? Or was it guided by the feeling of FOMO - Fear of Missing Out? FOMO is a well-known social phenomenon - the feeling of exclusion and anxiety at not being part of a popular activity/trend/event. Investors can highly relate to it, as the stock market fundamentally functions on the same psychology. The more everyone wants to have something, the higher its value.

FOMO has played a part in hyping up certain sectors in the investing landscape. Even seasoned investors are often tempted by the hype to reach out of their domains and invest in the hottest trend. Quite a few companies attained their unicorn status capitalizing on FOMO, as having multiple investors interested at the same time led to exponential valuations in very little time.

As a family office, we have been slowly, and conservatively building a venture portfolio. Most importantly, we identified our thesis for investing, and shortlisted and filtered profiles accordingly. We stayed out of certain asset classes and sectors on purpose, as they did not fit our thesis. As other investors rushed to invest in the next big trend, and a few actually managed to bag a unicorn in their portfolio in just a couple of years. I admit, it was tough then to dismiss FOMO.

But the market cycle never falters. In the fall of 2022, "funding winter" has set in, especially in the trending fintech and edtech sectors, ultimately validating cautious traders and skeptics. Most of the country’s leading startups are now trending for a different reason. According to the Ken, "as many as 52 startups, including unicorns like Byju's, Unacademy, Ola, and Udaan, have laid off more than 17,000 employees till November this year to cut costs." Mass layoffs are still turning the workforce sour and investors nervous, and the buck did not stop with the small players. The biggest corporations of the tech world - Meta, Twitter, and Amazon - all were participating in massive layoffs and restructuring, setting a grim tone for the economy.

As the key decision-maker and manager for our family office investments, I’ve been thinking a lot about the role of caution and wisdom in investing. One could benefit a lot by shifting from a FOMO-based approach to a JOMO-based one. JOMO - the joy of missing out, focuses instead on discipline, confidence in the strategy chosen, and calm, independent thinking. Fear and anxiety are rarely good triggers in decision-making, and the same applies in finance. 

What does a JOMO-based approach look like?

Make investment decisions based on one’s own goals and aspirations, not on what the market deems fashionable at the moment. Build a customized framework, and stick to it, without being swayed by what others are doing.

Understand your expectations better, and align your strategy accordingly. For instance, if you have capital that will stay liquid for more time, you can afford to make high-octane choices, at the risk of short-term loss. If you’re looking for high returns in three to five years, play it safer and invest in portfolios, instead of trending entrepreneurs.

By selecting products that fit your risk-return profile best, you also stand to experience less regret, better accountability, and improved efficiency in wealth management overall.