Quote of the Day: The fear of missing out

There’s a nasty little parasite that exists in nature known as the nematomorph hairworm (Spinochordodes tellinii) which typically infects grasshoppers and crickets.

Once fully grown, the worm is able to profoundly affect the behavior of its host; most notably, the worm can actually compel a grasshopper to throw itself into water.

This is great for the worm as it needs the moisture to reproduce. But for the grasshopper, it’s deadly.

There’s another vile protozoan known as Toxoplasma gondii. According to a 2007 study, rats and mice who are infected with it demonstrate a marked reduction in natural defenses, making them far more susceptible to being eaten by cats.

Nature is full of these unpleasant parasites which cause their hosts to engage in irrational, destructive, or even suicidal behavior.

Of course, they exist for humans too… especially for investors. In fact probably the number one parasite which affects investors is a very peculiar emotion: fear.

Specifically, it’s the fear of missing out that drives so much irrational investment behavior. Nobody wants to miss a big boom, no matter how baseless the fundamentals.

It’s this fear of missing out that compels people to continue investing in stocks, even though they are near all-time highs and trading at Price/Earnings ratios that are historically dangerous.

Ironically, this fear of missing out is stronger than the fear of loss. But if everyone else is jumping in, it’s easier to ignore the obvious risks of losing our life’s savings investing in ridiculously overvalued stocks.

Following the crowd is a great way to lose a lot of money.

Some of the most successful investors in history have been those who had the courage to go against the investment herd mentality. They conquered the fear of missing out, and they bought what everyone else hated… or looked where nobody else was looking.

(italics original, bold mine)

 

This priceless wisdom is from Sovereign Man’s Simon Black.