The fear of missing out, or FOMO, can be a powerful psychological force — and it may lead unwary investors to lose bundles of money, according to financial advisors.
A group of British psychologists defined FOMO as a fear “that others might be having rewarding experiences from which one is absent.” Financial advisor Josh Brown uses the term “animal spirits” to describe the concept of investors allowing their emotions to guide them.
These days, social media platforms are a big source of FOMO, bombarding users with messages about “hot” investments such as cryptocurrency, meme stocks and special purpose acquisition companies, or SPACs. The influencers and experts touting such assets claim buyers can earn bundles of money, but they may gloss over the risks or fail to disclose their own motivations.
This isn’t to say flavor-of-the-day investments always turn out to be flops for buyers, depending on when they buy and sell. Problem is: Investors often only hear about the big winners, not the duds, advisors and experts said.
Controlling FOMO “is probably the most important financial skill these days, in the social media era,” Morgan Housel, author of “The Psychology of Money,” said in September at the Future Proof wealth conference in Huntington Beach, California.