FOMO – Fear Of Missing Out
A good friend of mine was recently complaining about being tired. He had to be at work at 6 AM that morning and had stayed out way too late at a party the evening before. I said the party must have been a good one, and he replied that it really wasn’t that much fun but he couldn’t overcome his “FOMO.” When I asked what was “FOMO” he explained it is his “Fear Of Missing Out.” He was afraid the minute he left the party something really fun would happen and he would miss it. Of course, nothing really happened and he was just overtired at work the next day.
I was reminded of this when talking with colleagues about the upcoming Facebook initial public offering (IPO). I’ve had a number of inquiries from clients and friends about purchasing some stock in Facebook when it starts trading later this month. Often people want to purchase a few shares of the stock, if only so they can say they own some. They want to be able to celebrate with other buyers if the stock takes off. If the stock goes down or stagnates, their argument is they only bought a few shares and it won’t hurt too much. The price of buying those shares is their admission to the party. They would rather be in the company of friends, rather than at home alone (even if the party isn’t much fun.) Their FOMO is driving an emotional decision to invest rather than using rational investing practices.
Some of these much talked about IPOs, might end up being great long term investments. But prior to buying anything, investors should always do their homework and determine if the party is really worth attending.
Your comments are welcome.
Marisa A. Lenhard, CFA, CFP®