Social investing is all the rage nowadays. People post their thoughts, strategies, and wins all over social media—gaining considerable followings in the process. As a new investor, you begin to know, like, and trust these influencers.
However, you must avoid the temptation to invest in something only because of someone else’s recommendation. This is a recipe for disaster for you, your ego, and your wallet.
What is FOMO? FOMO, or the Fear of Missing Out, is the psychological need to invest in something “everyone” seems to trust. However, FOMO is usually a fool’s game, where one party is waiting for the bigger idiot to buy their shares.
Mother’s Happy Cash Flow Retirement
I previously wrote a couple of articles on FOMO: “JOMO: Joy of Missing Out” and “JOMO vs. FOMO.” Read those articles as I wrote them during the crypto craze of early 2021. I started my crypto career in April 2021, when the mania peaked.
Now that the hype has come down considerably, I believe in crypto more than ever. Understanding the power and convenience of decentralized finance, interest from coins, and the Metaverse, helped me keep investing in crypto. I have my own investing thesis.
The roots of FOMO. Where does FOMO begin, and how does it originate? The deep-seated roots of FOMO start in the fact that most people want to become rich overnight. When you read enough books, you’ll understand you need to build wealth slowly.
However, most people don’t read books; that is why they struggle in life. So, let’s set the stage. You have an average person who goes to work every day but can’t get ahead financially.
From Dirt to Dividends 3
Someone approaches them at the water cooler and tells them about a coin like Dogecoin in April 2021. The person invests $100 of their hard-earned money into Doge, and they double their cash.
They are excited and throw in more money. They also tell another average person about Doge. They tell them about their latest, more significant investment. Now, the new person invests $1,000 into Doge and expects it to double within a few days or weeks.
Let’s take a quick pause. Do you understand how rare it is to double your money that quickly? The rule of 72 tells you how fast it takes to double your money. You divide 72 by your interest rate to find how long it takes.
For example, the interest for USDC is 9%. I dividend 72 by 9 to receive eight years. And 9% is a tremendous amount of interest. Now, can you imagine someone looking to double their money in a few weeks? That’s the unspoken danger of FOMO.
How We Plan to Retire on Dividends 3
Back to the story. As you can tell, the word about Doge is spreading to people on “Main Street.” The world separates into two types of investors, “Main street” and “Wall Street.”
Here is something important to consider; by the time information reaches “Main Street,” someone has extracted the “true profits” from the investment. At that point, it’s just “Main Street” bidding against each other.
Eventually, someone will be left holding the bag as the price collapses. This scenario plays out in crypto almost every week. They call it a “pump & dump.” You do not want to be involved in any of this silliness.
Influencers and FOMO. You need to be extremely careful about influencers inside the crypto space. Think about it. Someone approaches them to pump a coin—say MFI coin.
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They buy a ton of MFI coins at 0.0000006 cents. Then, they “pump” it up to their 2 million large audiences. Their audience alone can increase the coin to .00006. Then, once FOMO sets in, the coin will close in on one cent.
The influencer has every incentive to keep pumping the coin to “Main Street.” They bought in at an extremely low price point—they are protected from the fallout.
Remember, by the time you hear about something at the water cooler; it’s already too late. When Bob approaches you asking about Dogecoin, it’s far too late. There is only one way to become rich as an average person—to become an insider.
The most important investing advice you’ll ever learn. Robert Kiyosaki gave the best investing advice I have ever read. In “Rich Dad’s Guide to Investing,” he explains the difference between investing insiders and outsiders.
Happy Cash Flow Retirement 7
An insider can control a product or service’s price point and profits. An outsider invests from the outer ring of a company, product, or service. The closer an outsider gets to the inside, the more wealth they accumulate.
Let’s look at real estate. You can invest in REITs on the stock market as an outsider. Or you can buy a rental property and control the rents as an insider.
You can invest in Mcdonald’s on the stock market or start a franchise and get closer to the inside. Always understand where you are in the investing ring. If you are outside, carefully invest as you try to get closer to the inner circle.
The magic of an infinite return. The ultimate goal of investing is to create an infinite return. This is when you have none of your money tied up in an asset.
Retirement Plus: Use Royalties to Supplement Your Retirement
When you go to a casino, bet $100 on black, and win $120, you now have $220. If you take your initial $100 out, you are now playing with house money to the tune of $120. That’s how you want to view all your investments.
Renting rooms is easily the best way to reach an infinite return and begin printing money. You invest very little (maybe $200-$500 on a bed, sheets, and mini-fridge). You then start a money printing machine that people cannot understand. You are making so much money that you won’t even understand it.
Early 2022 has been rough on the stock and crypto markets, yet my portfolio continues to grow. I am printing infinite money that I then invest into the market. I am also printing money by releasing books that cost me nothing to create.
Back to crypto and FOMO. I went off-topic because it’s crucial you understand this profound logic. Why would I try to get rich from the crypto markets—from the outside? I am getting rich from renting rooms and publishing books.
Trying to get rich from the outside is a fool’s errand. Avoid this at all costs. If you want to get rich with crypto, get closer to the inside. Find groups BEFORE they release their coins to an Initial Coin Offering (ICO).
Build Your Rep: Create Your Body of Work
There are ways to become early investors in coins and projects; however, you’ll have to work with the team. Nothing is free in this world. If crypto truly interests you, go deeper to the inside.
Eventually, you can release your own coin or project. Or you can get involved in decentralized finance or the metaverse. But don’t invest in crypto because of “Main Street” FOMO or your favorite influencer who “believes” in a particular coin.
Conclusion. The most important part of becoming an investor is understanding the difference between being an insider and an outsider.
Zero to 38: Retire by Age 38 in 10 Difficult Steps
I love investing in the Fundrise REIT from the outside. But, I have my own REIT with my three properties. I have far more control of my three homes, so I have a better chance of obtaining true wealth through those homes.
Hopefully, you understand why FOMO will always work against you. Even if you hit it big on a coin and pull out your money with a huge gain—what’s next? Now, you have to find another FOMO coin that meets your requirements.
Eventually, you’ll start putting your money into dumb coins, chasing the high of winning. Isn’t it easier to rent rooms and win EVERY. SINGLE. MONTH? But that’s just me.
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