By David Koch, CFP®, AIF®, CFA, Senior Wealth Advisor
FOMO, the Fear Of Missing Out, is getting a lot of mileage these days. We all know some people suffer from this more than others, although we all experience it to some degree. We all want to be included and feel significant in some sort of way.
The origins of the phrase are interesting. FOBO, the Fear Of a Better Option (not FOMO) first appeared in a piece for the Harbus, the Harvard Business School student newspaper, back in 2004. It was coined by Patrick McGinnis to describe what he and his classmates, those who had entered grad school just after the dot-com bust and 9/11, were feeling. FOBO captured how McGinnis and his peers felt about spending as much time with one another as possible before graduating college and going into a career.
After 9/11, and especially in New York City, young people wanted to make sure they were living life to its fullest, every second of the day. McGinnis even took his GMAT (Graduate Management Admission Test) in New York City on September 10th, 2001. Imagine how that felt?
FOBO in its original form never caught on, but over time it morphed into FOMO. And it took nearly 10 years for FOMO to really take off. Google Trends doesn’t see it really gain traction until 2013, but it is now part of our everyday vernacular. Now FOMO applies to nearly everything, including investing.
FOMO and Veblen Goods – Birkins and Bentleys
There will always be a party that you weren’t invited to, and in some ways FOMO is cousin to “conspicuous consumption,” a phrase coined by the economist and sociologist Thorstein Veblen (1857–1929). This is the practice of publicly displaying luxury goods to convey one’s wealth.
Think Birkin handbags and Bentley SUVs. These are called Veblen Goods, and they are the reason the luxury brands market exists. For better or worse, one big allure of these objects is to make us feel better about ourselves relative to our peers.
If none of your friends has a Bentley, then who cares? But if all your friends drive Bentleys – now you have FOMO.
This definitely happens in the investment world too. There’s always those friends talking about how much money they made on one investment or another. It’s the big gains that are talked about at the cocktail party, the country club, or the gym.
FOMO and Selection Bias – Hey Walter! Come see how much money I lost!
No one ever stands around the water cooler and talks about how much money they lost. So, bragging about investment slam dunks is something we need to take with a grain of salt – or a pound of salt. What you’re hearing is a carefully curated version of each person’s experience of investing that skirts the duds and failed strategies.
Typically, the kind of investing that doesn’t shoot for the big wins and plays the long, steady game isn’t necessarily what people brag about, but it’s what can help investors come out ahead. I talk about this at greater length in my blog here: When is a 5% Return Better Than a 6% ?
In Part II, I’ll discuss in more detail how FOMO can drive investor behavior – and significant market moves.
Disclaimer:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.
The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without previous notice. There is no guarantee any forward-looking statement will come to pass. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material should not be relied upon by you in evaluating the merits of investing in any securities or products mentioned herein. In addition, the Investor should make an independent assessment of the legal, regulatory, tax, credit, and accounting and determine, together with their own professional advisers if any of the investments mentioned herein are suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance. Any reference to a market index is included for illustrative purposes only as it is not possible to directly invest in an index.
