I make $800k per year but still feel FOMO when I see stocks like NVIDIA soar – should I take more risk?

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The advent of social media has turned a lot of people into more jealous versions of their former selves. When we see that our old college roommate just upgraded their house, we tend to want to do the same. When we see former coworkers taking luxury vacations, we tend to want to upgrade our travels, too.

Just as it’s possible to experience FOMO when it comes to experiences and things, so too is it possible to experience stock market FOMO. Such is the situation this Reddit poster is in.

They’re 36 years old with an annual income of over $800,000, and they have about a $3 million net worth. The poster is experiencing FOMO after seeing stocks like NVIDIA soar, and they’re wondering if they should change their approach to investing by going all-in on similarly hot companies.

It’s easy to see why they’d be tempted to shift their investing strategy. But going heavy on a select few stocks is a move that could sorely backfire.

It’s best to strike a balance

Some people do get lucky in that they invest in the right stocks at the right time and end up millionaires thanks to the success of a select few companies. But overall, I don’t happen to like this approach to investing.

I’ve always felt that a diversified portfolio is the best type to have. Now to be clear, that doesn’t mean you can’t have a portfolio that includes a stock like NVIDIA. But I also don’t believe in chasing hot stocks and making that your strategy.

The problem with this approach is that you never know when a given stock might tank. Granted, the broad market could tumble, too. So if you have a portfolio that largely consists of S&P 500 ETFs and there’s a market crash, you might lose 20% or more of your value overnight.

But there’s a difference between that happening versus going all-in on a specific stock, or a handful of stocks, and having something happen there. If you decide to invest half of your portfolio in NVIDIA, or any individual company, then sure, there might be a lot of upside. But if that one stock tanks, forget about losing 20% of your portfolio’s value. You might lose 40% or 50%, or a similarly scary percentage.

So all told, I believe in striking a balance. And I also believe that it’s important to invest within your comfort zone.

Loading up on popular stocks might make you money. But if it causes you to lose sleep, then you’ll need to ask yourself whether the risk is worth it.

Ask an advisor for help

The poster above is in a unique situation in that they earn an exceptionally large income. This gives them the option to perhaps take on a bit more risk knowing that if a given investment of theirs loses value, they can make up for it via their higher income.

But you could also look at their situation the opposite way. You could say that since they earn so much, why take the risk of major losses by loading up on individual stocks that have the potential to be volatile? They may not need their portfolio to beat the market if they’re able to save and invest a lot of money on an annual basis due to earning a generous salary.

That’s why I’d tell this poster — and anyone else who’s not sure they’re investing the right way — to consult a financial advisor. An advisor can review your risk tolerance and goals and help you strike the balance I talked about above.

One final thought: If you’re someone who tends to invest in the broad market, you may not realize it, but you’re getting the upside of soaring stocks like NVIDIA. An S&P 500 ETF, for example, gives you exposure to the largest publicly traded stocks by market cap. So while that’s not exactly the same thing as holding those stocks individually, you’re still getting to benefit when they increase in value.

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