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It’s hard to think of a worse reason to invest in something than fear of missing out.

But FOMO is a powerful driver in personal finance today. Between houses, stocks and cryptocurrencies, money has been made in the past two years at a pace that goes way beyond normal. If you haven’t had your share of those gains, it’s natural to feel like you need to get a piece of the action.

You definitely should have your piece. But how do you get it in a way that minimizes the risk of diving into a financial asset that plunges in price? If you doubt the potential for a price drop, check out what’s happened with stocks and crypto so far in 2022.

Let’s look at a two-track plan for FOMO. One, adopt the all-time best method of building wealth, which is to make regular contributions to a diversified portfolio of investments. Two, find a side hustle, a term that usually means a job on the side to boost your income. In investing, a side hustle is a small bet you make on something speculative.

Before we continue, it has to be noted that a lot of investing FOMO is based on an idealized view of what’s going on with successful investors. Take cryptocurrency, for example. MarketWatch shows that bitcoin traded around US$32,000 in late 2020 and closed around US$46,300 last year, good for a gain of almost 45 per cent. Nice, right?

The actual experience of bitcoin investors last year was much more of a boom-bust situation. The price shot up above US$63,000 in April, plunged below US$30,000 in the summer, surged again in November to more than US$67,000 and then began a decline that continues into 2022. Quite obviously, not everyone makes money in bitcoin.

Even so, these are special times in the financial world. Low interest rates and emotions running hot in the pandemic have produced a hunger for financial risk and profit. Investors have sized up periods like early 2022, where the prices of stocks and crypto are dropping, as buying opportunities.

But when financial assets rise extraordinarily, they tend to fall in much the same way. This is the rationale for old-fashioned wealth building through regular contributions to a diversified portfolio.

When you invest this way for decades, you build wealth sustainably through up and down markets. For long-term success, it’s a more sensible approach than lunging toward an asset that is streaking higher in price in hopes you catch it at the right moment.

Figure on average annual returns after fees of 5 per cent to 6 per cent from a diversified portfolio, including dividends and interest from bonds. What, too boring?

It happens that even diversified portfolios produced double-digit returns in 2021. With roughly 40 per cent of its portfolio in out-of-favour bonds and 60 per cent in stocks, the iShares Core Balanced ETF Portfolio (XBAL) made 11.1 per cent last year on a total return basis. With its 70-30 mix, the Horizons Balanced TRI ETF Portfolio (HBAL) made 14.6 per cent.

Some mushy years ahead will average those returns down for these and similar portfolios, but you can count on the good outweighing the bad over the next 10, 20, 30 or more years. The risk of retiring with a case of regret at having missed out is minimal when you look back on a lifetime’s investing based on regular investment contributions to a diversified portfolio.

Why consider the side hustle if slow and steady investing is the way to go? Because a little thrill-seeking might help you keep your financial equilibrium in a bull market. A definition of a small investment is 5 per cent of your total holdings.

You might make some money with your side hustle, or you might learn a lifelong lesson about how FOMO-driven investing decisions can work against you. A quick example of how things can go wrong can is the Ark Innovation ETF (ARKK), which holds trendy stocks such as Tesla Inc. and Zoom Video Communications Inc. and has fallen in price by close to half since last February.

One last thing about an investing side hustle: It may help with FOMO related to housing. A big reason why house prices keep soaring is that people see a home as a can’t-miss investment.

Locked out of home ownership because you can’t afford to buy in? The best suggestion is to keep saving for a down payment, but that won’t be enough for some people. For them, a small investment in something risky might be the answer to the fear of missing out.

Attention, crypto investors

We’d like to talk to investors who have put money in cryptocurrency for an upcoming episode of the Stress Test personal finance podcast for Gen Z and millennials. E-mail Globe and Mail personal finance editor Roma Luciw at rluciw@globeandmail.com.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.