Exciting stocks like the new IPO $RBLX has investors scrambling to buy stock as the price continued to rise for a few days. The stock initially was valued at 45 dollars a share and quickly jumped to $64.50. Investors see this type of quick rise and begin to get a sense of FOMO or “fear of missing out.” FOMO in investing can be dangerous because an investor could jump in at a price that is not reflective of reality. Jumping in a the top of the hype will leave investors with only one way to go and that is down. The GME craze left a lot of bag holders, but if they held on for a while GME is back up to $276 as of today!
AMC was a great example of FOMO that I had mistakenly jumped into at a very high number. I bought in at 12 dollar a share hoping it would climb, but soon as I did that the price fell to the floor. At one point, AMC shares dropped below 6 dollars a share which is half of my position gone in unrealized losses. The anxiety part kicks in because I knew that AMC stock was all hype and basically worth around 1 cent, according to Richard Greenfield. The price eventually jumped to almost 8 bucks a share and I unloaded the position, losing roughly 30% of my investment.
Ironically, as of today the share price from AMC is hovering around 11 dollars! A couple of lessons I learned from my AMC experience is 1) FOMO will ultimately end up in a loss 2) Paper hands will result in a loss too. If I held AMC with diamond hands, I would be on track to at least breaking even on a bad investment, but I got nervous and sold. Rational thinking would suggest that I made the correct decision given the fact that AMC stock is almost worthless. What experiences have you had with FOMO and investing? How did that experience change your strategy?