When FOMO is Justified

Fear of missing out can be a powerful driver of emotions in consumers, but what are the consequences of missing out on the stock market's best days?

Ian Tam, CFA 6 May, 2021 | 9:04AM
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If you were born after 1985, please skip this first paragraph.

The term FOMO is an acronym that stands for the "fear of missing out", originally coined by Patrick J. McGinnis in 2004 and used largely by the highly connected millennial and Gen Y generations. This "fear" is spurred on by the fact that many of us are inundated with updates about our social circle’s activities, to the point that some individuals feel like they are "missing" out if they are not actively participating in conversations or activities around them. The term is generally regarded as negative, sometimes contributing to a person’s indecisiveness or overcommitting to obligations.

Although FOMO can often be waved off as a novelty term, the concept becomes very real when it comes to investment decisions. The term has also come into the spotlight lately: in the United States, Collaborative Investment Series Trust recently launched a ETF with ticker “FOMO” with a core tactic to seek risk wherever it exists. Though for most conservative investors, this risk-on approach is likely not a great fit, the underlying idea of having FOMO is arguably the correct instinct when it comes to marketing timing, especially amidst the severe market drawdowns and widespread panic that we’ve been experiencing.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Ian Tam, CFA  Iam Tam, CFA is Director of Investment Research at Morningstar Canada. 

 

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