FOMO (Fear of Missing Out): The Fear of Missing Something (e.g., Profits)
The term FOMO (“Fear of Missing Out”) refers to the fear of missing something and originates from the social media environment. The phenomenon itself was described shortly before the turn of the millennium; the term “FOMO” first appeared around 2004. In the context of investing, FOMO refers to the fear of missing out on profits.
While social media FOMO is about the fear of missing out on social activities or trends, financial FOMO is about the fear of missing out on potential profits.
It involves profits that seem within easy reach. FOMO arises when one has the impression that higher profits could be achieved if only one approaches it correctly.
FOMO and the Deutsche Telekom IPO
As a mass phenomenon, financial FOMO occurred in Germany during the Deutsche Telekom IPO in 1996. It seemed as though everyone was buying Telekom shares and would soon be wealthy.
Those who could not afford to buy Telekom shares but—also due to massive advertising—believed this was an attractive investment understandably feared missing a once-in-a-lifetime opportunity.
After all, wealth is relative. What if, while being generally well-off, half the population suddenly becomes wealthier with these shares in their portfolios?
In that case, one would, without any fault of their own, become relatively impoverished. The neighbors and colleagues who have now become wealthy through rising share prices would inflate prices everywhere, leaving one able to afford less.
FOMO: Fear of Being Less Smart Than Others
FOMO thus refers to profits that others achieve and that would theoretically also be accessible to oneself. These could be stocks that, in hindsight, turn out to be highly lucrative and that one could have purchased.
With the next potential stock market star, there is then the fear of missing out again this time. In this sense, financial FOMO is very similar to the original social media FOMO: the fear of missing out when others are doing something exciting (like going to a party or making lots of money).
FOMO can lead to overly risky investments in finance. Essentially, many failed investments are based, more or less, on FOMO. In most cases of negative returns, it would have certainly been possible to invest the money more conservatively, such as in fixed deposits or bonds.
Feeling Left Out: FOMO and Peniaphobia
FOMO is somewhat similar to peniaphobia, the real or pretended fear of poverty. This also affects people who, rationally speaking, cannot actually become impoverished because they could live very comfortably to the age of 110 with what they already have.
According to social media and forums, FOMO primarily affects people who have already built or inherited some wealth and compare themselves to others, feeling pressured to be even more skillful or daring than they already are with ETFs and stocks.
Peniaphobia is a more passive variant of the feeling of being left behind. While FOMO candidates actively invest, calculate, and nervously look at even riskier investments, peniaphobics are plagued by the vague feeling that, despite their comfortable cushion, they might still end up on the street in the end—”you never know.”
Fear of Being Poor or Not as Rich as Possible
In reality, the causes of FOMO and peniaphobia are, of course, individually different and depend not least on one’s financial circumstances.
Those who actually have very little money are indeed poor. Those who leave their money in a checking account and only use savings accounts indeed miss out on relatively safe profits.
Overcoming FOMO and Peniaphobia with Experience and Mathematics
Both FOMO and peniaphobia can affect one’s quality of life.
FOMO may ease a bit after burning fingers with day trading or other stock market transactions. Peniaphobia might be alleviated if those affected take stock and calculate—or have someone calculate—how they are actually doing financially.