FOMO (fear of missing out)

Buying because other people appear to be making money, rather than because you have formed a view about what the asset is worth.

Example

An asset triples over a few weeks, coverage is everywhere, and the reason for buying becomes 'everyone else is already in' rather than any figure you worked out yourself.

Important

FOMO reliably arrives late - the emotional pull is strongest after most of the move has already happened, which is precisely when the remaining reward is smallest and the downside largest.

Related terms

• Herding — Taking a position mainly because many others are taking it, treating the crowd's activity as though it were evidence about value.
• Speculation — Putting money at risk on an outcome you cannot analyse with any real confidence, hoping for a large payoff.
• Confirmation bias — The habit of seeking, believing and remembering information that supports what you already think, while discounting information that does not.

Lessons that explain it

• Buying the story — A good narrative is not evidence, and it is the most reliable way to end up paying a price that only works if the story is much better than it says. (8 min)
• Confirmation bias and the fear of missing out — Two failures that feel like diligence and enthusiasm: reading only what agrees with you, and buying because the decision is being made for you by other people's excitement. (11 min)

All 578 terms in the Investing glossary