In this issue of Investing Daily Dose (IDD):
⚠️FOMO Investing Through the Ages⚠️
Check out this vintage ad … from LIFE magazine.
It’s a four-question “investment quiz” – courtesy of the New York Stock Exchange.
And check out Question No. 1:
You’ve been thinking that common stocks might help take care of your future. One day, a friend offers to let you in on a “great deal,” but you have to act fast. Would you do it?
Hmmm …
A hot tip … on a stock that’s about to move … and you’re probably afraid if you snooze, you’ll … miss out?
Hmmm … that sounds like … FOMO.
The Gen-Z (27-and-under) crowd has grabbed a lot of labels … like the first “fully digitally native” crop … and the “FOMO Generation.”
But it turns out that Fear of Missing Out is not a new invention.
Heck, it’s March 2024. And that LIFE magazine ad ran in 1968.
This lesson – that FOMO isn’t new – is one that’s worth heeding.
And if you want further confirmation of FOMO’s longevity, check out Morgan Housel’s great book “Same as Ever: A Guide to What Never Changes,” which (as the title tells us) is a study in “the more things change/the more they stay the same.”
It’s one of our favorite reads here at IDD. And it’s an additional reminder that FOMO helped fuel the dot-com collapse. And the Crash of ’29. And a few other global financial calamities.
There are, however, two sides to each tale.
Even FOMO.
According to a survey from the CFA Institute and Financial Industry Regulatory Authority Investor Education Foundation (FINRA), 40% of Gen-Z investors said FOMO was a major catalyst in their decision to start investing.
According to that same survey, more than 80% of American Gen Zers started investing before they turned 21.
Getting started as an investor – at all – is good. Starting young is great.
But starting is one thing … executing is another.
A trading mentality has infected the financial markets. Options speculation has exploded. An “I want it now” FOMO mindset has fueled a “betting” mentality. And “execution” has become a real casualty – gunned down by “impatience.”
Although impatience is a trait ascribed to Gen Z, the reality is that FOMO has infected broad swaths of investors.
In 1968 … and even more so in 2024.
Bill’s Investing Takeaway
“We keep saying this … you’re either building wealth or killing wealth. And FOMO … which leads to impatience … is one of the biggest killers of all. Options. Chasing the hot money. Not following your plan. Not having one at all. These can be fatal mistakes.
Here’s the thing … we’re moving into a stretch where some of the most-powerful storylines are spotlighting some of the most-powerful wealth builders … storylines that demand patience … and time frames of three, five, seven or 10 years … but storylines that open the door to life-changing wealth.
And, by the way, at 17, my son Joey is Gen Z. And he’s part of that 80% who started investing before they turned 21.
In fact, I got him started at 12. With a few thousand bucks I contributed … and some long conversations about things he liked. He loves his iDevices … and iTunes … and Air Pods … so we bought a few shares of Apple Inc. AAPL 0.00%↑.
He loved his xBox … and the game Minecraft … so we bought Microsoft Corp. MSFT 0.00%↑.
His favorite food is Mac-and-Cheese, so we bought Berkshire Hathway Inc. (BRK. A, BRK.B), which owns Kraft Heinz.
He’s an ardent streamer … so we got some Netflix Inc. NFLX 0.00%↑.
And a few others.
It’s only a few shares of each. But what we paid … and what those shares are worth now … means he’s got quite a head start on his friends and classmates.
And the value goes well beyond the money he’s making.
I mean, he’s paid attention to the companies … he’s become ‘sensitized’ to business and economics and finance. (He’s watched the launch of our IDD and Stock Picker’s Corner (SPC) franchises with real excitement.) And he's gained insights that will benefit him … forever.
That’s worth more than the money I ‘staked’ him with.
I’m hoping that Joey is one Gen-Zer who’s on his way to wealth.”