FOMO and Investing Don't Mix - The Perils of Viral Demand

Chief Financial Officer, Kevin Manning

Our process – helping you to successfully achieve your goals At Regent Peak, one of our core responsibilities to clients is to understand their financial goals, while simultaneously managing their investible net worth in a way that provides them the greatest likelihood of achieving those goals. We want to set our clients up for success during their lifetime and beyond.

With all the attention around viral trades like Bitcoin, other cryptocurrencies, and the darlings of Reddit, the obvious question becomes, where do these emerging trends fit into that process? My short answer: they simply do not, at least not today.

  • The two perils of FOMO – Uncertainty and Risk
  • That is not to say that these viral investments have not created wealth, because in certain circumstances, they have. Our job, however, is not to just grow the wealth of our clients, but to maintain that wealth for the purpose of funding their objectives long into the future. That is where the conflict occurs. The FOMO (fear of missing out) is a natural emotional response to a result that has already occurred. That response tends to ignore the risk and uncertainty required to produce a desired result.
  • Risk and uncertainty are things that we cannot afford to ignore when it comes to investing assets that are required to fund one’s livelihood. Despite the recent success we’ve seen with these types of investments, they still carry the kind of risk that could bring significant loss, and if that’s applied to assets earmarked for your future, it would be considered catastrophic.
  • The risk to you – losing focus
  • For instance, on Bitcoin’s path to $50,000 (its price at the time of this writing), it has lost 80% of its value two different times1. Now imagine 80% of the resources you are relying on for retirement, gone in a matter of weeks or months. There would be no greater disservice that we could do for the families we work with, than to put them in that situation.
  • Now, the goal of this blog is certainly not to condemn these investments. It’s simply to refocus purpose and intent behind specific investments. I want to shine a light on the dangers that lurk, if decisions are made without full acknowledgment of risks, as well as rewards.
  • Keep your eyes open
  • In fact, I like many, am fascinated by emerging technologies and trends, including cryptocurrencies and blockchain. And, I will continue to follow intently, to see how industries and markets can adopt them into mainstream application. I would advise, anyone that is passively investing in them, do so with eyes wide open, and use discretionary funds that would not materially impact their financial position if their investment went to zero tomorrow.
  • I would love to hear your thoughts on how these investments do or do not fit into your
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Reach out to our team if you are interested in exploring options, and understanding what it could look like for you to become a client of ours. We welcome the opportunity to have a discovery conversation with you!

  • Kevin Manning, CFP ®
  • Chief Financial Officer
  • 600 Galleria Pkwy., S.E. Suite 850 Atlanta GA 30339
  • 470-867-3550 (main)
  • Regent Peak Wealth Advisors
  • regentpeakwealth.com

1https://medium.com/galaxy-digital-research/contextualized-analysis-of-bitcoin-drawdowns-f4717ff8e3be

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