FOMO
Fear Of Missing Out — the anxiety that drives investors to buy into rising assets at peak prices for fear of being left behind, often leading to poor investment decisions.
Example
“FOMO drove retail investors to buy Bitcoin at $60,000 in late 2021 — near the all-time high — before it crashed to $16,000.”
Memory Tip
FOMO = Fear Of Missing Out. Drives buying at tops. The emotional enemy of rational investing.
Why It Matters
FOMO can cause investors to abandon their long-term financial plans and buy assets at inflated prices, resulting in significant losses when the market corrects. Understanding this psychological bias helps you make rational decisions based on your goals rather than emotions, protecting your wealth from impulsive choices.
Common Misconception
Many people think FOMO only affects inexperienced investors, but even seasoned professionals can fall victim to it during market rallies. The belief that missing out on gains is worse than the risk of losses is a common trap that affects investors across all experience levels.
In Practice
During the cryptocurrency boom of 2021, investors who feared missing out bought Bitcoin at 60,000 dollars per coin, only to watch it drop to 19,000 dollars in 2022. Those who had invested based on FOMO lost over 68 percent of their investment, while disciplined investors who had planned purchases at specific price points minimized their losses.
Etymology
Acronym for Fear Of Missing Out. The FEAR of MISSING OUT on profits others are making.
Common Misspellings
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See Also
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