Behaviour
Fear of missing out
Also called FOMO
Buying because something is rising and others are profiting, rather than because of any analysis.
How it works
FOMO reliably peaks near tops, because that is when past returns look best and coverage is heaviest. It is the mechanism by which the most people buy at the worst prices.
It is also the emotion most amplified by social media, where gains are posted and losses are not.
Related terms
- HerdingFollowing what others are doing rather than reaching your own conclusion.
- BubbleA price rise driven by expectations of further rises rather than by underlying value.
- Recency biasGiving too much weight to what happened recently when forecasting what happens next.
- Behaviour gapThe difference between what a fund returned and what its investors actually earned in it.
More in Behaviour
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.