When FOMO is Warranted

If you missed just two of the best market days in 2008 and 2020, your portfolio would be down 19%

Ian Tam, CFA 28 April, 2021 | 2:04AM
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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 with a negative connotation, 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: 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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About Author

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

 

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