Financial FOMO: Why Following Investment Trends Can Cost You

By Jared Andreoli, CFP®, CSLP®

It’s all too easy to get pulled into conversations at work about the latest cryptocurrency or to become curious when your colleagues start talking about too-good-to-be-true returns from meme stocks. And while financial FOMO is common when you hear about new investment trends, that’s not reason enough to jump on the bandwagon.

Following every investment trend can potentially harm your long-term financial health. Here’s a look at what you can do instead.

Why Is Following Investment Trends a Bad Idea?

If you’ve been tempted to buy into a trending investment based on in-person or online hype, you’re not alone. Trending investments often rise rapidly in price because of collective enthusiasm and nothing else. These bubbles can’t last forever. Eventually, the price of the investment drops when people start to doubt it.

Most people who invest in meme stocks and other investment trends are trying to generate a profit from market volatility. Some people do end up winners, but others suffer devastating losses. And if you invest on margin, you could actually lose more money than you invested and end up in significant debt.

The bottom line is that you shouldn’t take investment advice from people who aren’t financial advisors. If you think a particular investment trend could actually add value to your portfolio, it’s worth having a conversation with your advisor.

Understanding Speculation vs. True Investment

It’s important to be wary of emerging investment trends, especially if they seem to promise incredible returns. This doesn’t mean you should never consider investing in such a trend, but you should have a solid understanding of speculation and true investment first:

• Speculation: Putting money toward high-risk assets that may or may not be profitable

• True investment: Putting money toward assets that carry a reasonable chance of return with low or moderate risk

Most investment trends are speculative; there’s a chance you could generate a significant profit, but there’s also a chance that you could lose everything you invested. 

A casino is an apt analogy. When you gamble, you could potentially win much more money than you invested, but your chances of winning are relatively slim. There’s nothing wrong with setting aside some money for a trip to the casino, but you wouldn’t empty your savings account and gamble all of it.

Integrating Speculation Into Your Portfolio

Some of our clients learn about the risks of investment trends and decide to stay away from them altogether. Others want to play the market a little but do so responsibly. If you fall into the latter camp, we typically suggest following something called the 5% rule.

The rule itself is simple. Set aside 5% of your total investment portfolio (not your net worth) as your speculative investment budget. If you happen to generate a profit, you may be very glad you invested. But if you lose your money, you won’t have done significant damage to your portfolio.

In our experience, losing the entire speculation budget is not uncommon. Friends and colleagues might be eager to tell you about a profit, but they’re less likely to talk openly about losing thousands of dollars on unsound investment trends.

Investment Trends and Your Portfolio

Basing your portfolio on investment trends is a recipe for disaster. But if you set a budget for speculation, you can avoid FOMO without jeopardizing the foundation you’re currently building.

Trends can be fun to track, but if you want to build real wealth, start by establishing healthy financial habits now. Simplicity Financial LLC focuses on helping physicians grow their wealth to create strong financial futures. 

Get started by scheduling a free consultation, or reach out to us by emailing jared.andreoli@simplicityfinancialllc.com or calling 414-207-6473. 

Frequently Asked Questions

What are investment trends, and why can they be risky? 

Investment trends are popular assets or strategies that gain attention quickly, often driven by hype rather than fundamentals. While they can generate short-term excitement, they’re often volatile and unpredictable, which can lead to significant losses for investors who jump in too late. If you’re looking for reliable guidance to help you evaluate whether a trend fits into your long-term investment strategy, we at Simplicity Financial would love to be your sounding board.

How can I avoid falling into financial FOMO with investment trends?

Avoiding financial FOMO starts with having a clear investment plan based on your goals, not someone else’s success story. It also helps to recognize that people tend to share wins more than losses, which can distort your perception of risk. Simplicity Financial can help you stay focused on a disciplined strategy, even when trends create pressure to act.

Is it ever okay to invest in trending investments?

It can be appropriate to invest in trends, but only in a limited, controlled way. Many investors use a small portion of their portfolio for speculative opportunities while keeping the majority focused on long-term growth. This approach allows participation without putting your overall financial plan at risk. Would you like help structuring your portfolio to balance opportunity with long-term stability? Reach out to us at Simplicity Financial.

About Jared

Jared Andreoli, CFP®, CSLP®, is president and financial planner at Simplicity Financial, a fee-only RIA dedicated to helping early-career physicians conceptualize their financial picture and achieve their financial goals. Jared specializes in devising individualized financial road maps for clients, and he loves nothing more than a full day meeting with clients who value his partnership to solve problems—big and small. 

After college, Jared spent six years working as a mutual fund administrator for a large company. While he learned an immense amount about the financial world, he was missing the personal connection of working with individual clients. Combining his passion for finance and personal connection, he established Simplicity Financial in 2017.

Jared has a degree in finance with a concentration in financial planning from Western Kentucky University, along with the CERTIFIED FINANCIAL PLANNER®, CFP® and a Certified Student Loan Planner (CSLP®) certifications. Outside of work Jared enjoys cooking and traveling. He played baseball in college and still coaches occasionally. He and his wife recently welcomed a daughter, who occupies most of their time. To learn more about Jared, connect with him on LinkedIn.