How FOMO Destroys Your Wealth
From G.E. to GameStop, investors have a long history of following the herd right off the cliff
No doubt you’re familiar with FOMO — the “fear of missing out.” It’s the angst we feel about being left out of the fun. It’s what drives us to go to social events we aren’t particularly interested in, because everyone else is going and we’re afraid of being the only loser sitting at home.
FOMO isn’t just a social phenomenon, though. I spent two decades as an investment manager, and I saw it time and again with individual investors. But unlike the social variant, where the only downside is a few pangs of regret, succumbing to investment FOMO can be a financial disaster.
I saw it with the so-called “Super Blue-chip” stocks like G.E. in the mid-1990s, and with dot-com stocks in the late 1990s, and with real estate in the easy-money mid-2000s. And I’ve seen it again this year, in the buying frenzies in so-called meme stocks like GameStop and AMC Theaters, and cryptocurrencies like Bitcoin and Ethereum. All are investments driven into the stratosphere recently in large part by investment FOMO.
Yes, some fortunate folks have indeed made a lot of money in meme stocks and crypto. A few have even made a fortune — on paper, at least. In the early stages of a buying…
