FOMO (fear of missing out). I’m sure you’ve felt it before while being bombarded with headline after headline about everyday people striking it big with relatively little investment in the latest investment fad.
Take this one for example, “Idaho teenager becomes a millionaire overnight by investing $1,000 in Bitcoin” It’s so easy a teenager can do it!
Before you know it, you’re sucked into the hype and putting money into something you barely understand.
But whether it’s cryptocurrencies, cannabis stocks, or whatever fad is the topic of conversation right now how do you determine if you should really be jumping on the bandwagon?
Investing versus Speculating
You need to understand the difference between investing and speculating.
An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
Benjamin Graham, The Intelligent Investor
One of the worst mistakes someone can make is speculating with their money when they think they are investing.
The only way you can consider yourself an investor is if you develop strict investment guidelines to follow and actually understand the company you are investing in. Without that, you’re just relying on luck.
Keep Your Lizard Brain At Bay
Another thing you’ll want to be aware of is that primitive part of your brain that functions purely off of emotion.
Our brains are hard-wired for thrill-seeking. Think about rollercoasters, haunted houses, gambling, and speculative investing. They all cause our bodies to release dopamine throughout our system which makes us feel good.
It’s this part of your brain that is going to make it difficult to follow any investment guidelines you’ve put in place.
Timing Is Everything
Even if you’re the next wunderkind of investing, it won’t matter much if you’re late to the game. Just look at what happened with Bitcoin a few years ago.
Early adopters — the ones who rode the wave as euphoria grew and knew when to get out — were the ones who came out on top.
Speculators who bought near or at the peak, hoping that the rise would continue, were caught with their pants down as the value plunged seemingly overnight.
Is It Right For You?
The idea of striking it big with just a little bit of money and effort is appealing. Just like winning the lottery.
But unless you on track with your financial goals, and have the disposable income to play with, I recommend focusing your efforts on the only true way to build wealth which is saving!