- Two in five investors regret purchasing a hyped investment product, according to new FCA research
- Over half (51%) of young investors (aged 18-40) put in more money than they originally intended due to fear of missing out (FOMO)
- What are the dangers of buying something going ‘viral’ online?
- Three golden rules for investing
“It’s easy to get caught up in the hype, particularly if a product goes ‘viral’ online and everyone’s talking about it. FOMO, or fear of missing out, is a powerful driver and there are worrying signs it applies to investments as well as consumer products,” says Dan Coatsworth, investment analyst at AJ Bell.
“New research from the FCA found that two in five investors aged 18 to 40 regret purchasing a hyped investment product.
“Getting caught up in the hype can be a dangerous thing. The FCA’s research shows that cryptocurrencies were fourth on the list of viral items people had bought within the last year. Cryptos are high-risk, volatile investments and are not suitable for everyone.
“Equally, piling into stocks and shares because they’re going up in value and everyone’s talking about them is a risky strategy, particularly if investors allocate more money than they can afford to lose or they buy after the price has already risen a lot. There is a risk they are buying precisely at the wrong moment and quickly lose money.
“Feelings of regret can reduce appetite for future investing and that could see individuals lose out if they don’t put away money for later in life. Investing mustn’t be rushed, but equally it doesn’t have to take up hours of someone’s time.”
Three golden rules to follow:
- Only invest money you can spare. It’s important to have some cash set aside for emergencies and that you prioritise paying down expensive debt. Once those are sorted you can budget for saving and investing.
- Make sure you’re happy with the risks you are taking. Investing might not be right for you if a small loss could keep you awake at night. But if you’re happy with investments moving up and down in value, investing can be rewarding over the long term.
- Have a clear reason why you’ve selected a particular investment. Buying something because it’s the talk of the town isn’t a solid reason and you should consider how it may fit into your wider investing strategy and long-term financial goals.
