Regret is an annoying feeling.
It lingers.
But perhaps the most fascinating part of regret is that we tend to imagine that the thing we didn’t do…or the choice we didn’t make…or the risk we didn’t take would have put us in a better position than we are in now.
I’m here to tell you that even successful investors regret missed opportunities (or in modern parlance, “FOMO”).
The thing that makes them successful is that they stick with a winning strategy even when FOMO kicks in. It is tempting to abandon ship when you feel like your strategy may have cost you, but objectivity shall prevail!
Here are few things to consider when confronted with a tempting investment that goes against the strategy you’ve worked hard to implement:
1) Ask Yourself If You’re Being Driven by Emotion
To put it crassly, the stock market does not care about your feelings. So, it is important to make decisions that are rooted in logic instead of fear or greed. If you’ve developed a strategy and the new IPO you’re salivating over only meets 4 of the 10 requirements in your strategy, take a pause. To buy that stock is effectively abandoning your strategy for a new one. Ask yourself if you truly want to do that.
And be sure to measure your progress! Our brains are funny in that they aren’t the best at remembering things accurately when emotion is involved. Every time I miss out on a high flyer because my strategy says “avoid stocks like this,” I look at how well it’s done for me the last 10 years. (And the number of times I’ve avoided big losers because it told me to stay away).
2) Look At How Similar Stocks Have Performed
Sticking with the example of the IPO, first you have to be honest with yourself about why you’re picking this stock. If you are looking at it simply because there is a ton of coverage about this IPO in the media, look at the last few times the news couldn’t stop from reporting on an IPO. How did those stocks do over the long haul? Did they grow? Did they fall? Were they incredibly volatile? How would you [honestly] have reacted if you experienced some of the dips?
3) Remind Yourself That You’re an Investor, Not a Trader
Traders buy and sell stock frequently. They might buy and sell the same stock within a single day. For most people this is a way to lose money quickly and it requires a ton of time and energy to track a stock each minute. For a Trader, they may be in a rush to buy a stock.
But if you’re an Investor, you are not interested in how a stock might move within a day, a week or even a month. You think about investing in terms of years. This is to say, you don’t need to immediately buy something that hits your radar. (Especially if it doesn’t meet your strategy criteria). Take a step back. Review the risk of a new opportunity. Don’t give yourself a shot clock for no reason. Making sure you review an opportunity before hitting the “buy” button. Taking the time to make an informed decision will probably give you a clear head to walk away from buying something that doesn’t make sense for you.