FOMO — The Psychology of Jumping In for Fear of Missing Out

FOMO is short for 'Fear Of Missing Out'—the fear of missing something. It refers to the anxiety and impatience that arise from feeling that you alone are being left out while others seize a good opportunity.

In investing, it shows up like this. When a stock or coin you didn't buy keeps soaring, you rush in without a plan on the feeling that 'if I don't get on even now, I'll regret it for life.' Especially these days, talk of 'who made how much' pours out in real time on social media and communities, making this anxiety far greater.

Behavioral finance sees FOMO as a psychology attached to 'herd mentality.' It's the feeling that since everyone else is doing it, I should too. The problem is that this emotion pushes out calm judgment, and as a result easily leads to the mistake of buying high and selling low.

In fact, missing an opportunity isn't a decrease in your money. You simply didn't earn. So why does it hurt like a real loss?

The Nobel-winning Kahneman and Tversky's 'prospect theory' gives a hint. People feel the pain of a loss more strongly than the joy of a gain of the same size. So even a 'missed opportunity' gets received as if you lost money, and to avoid that pain you rush to hit the buy button.

When the comparison 'everyone else is making money' is added on top, the anxiety doubles. At this point our brain, rather than weighing 'is this asset really worth that much?', gets dominated by the impatience of 'if I don't buy quickly, I'm late.' What's frightening about FOMO is exactly this point—that emotion, not judgment, pulls the trigger.

Let's see how expensive a price FOMO makes you pay, through actual cases in history. (This is not about buying a specific asset or predicting the future. It's an educational record that 'these things happened.')

① The dot-com bubble (2000): As internet-related stocks surged, everyone jumped in. The U.S. Nasdaq index rose to a March 2000 peak (about 5,048), then fell about 78% from the peak by October 2002. And it took about 15 years to recover this peak.

② Bitcoin (2021–2022): After peaking at about $69,000 in November 2021, it fell about 77–78% to around $15,000 in November 2022. The closer to the peak people jumped in via FOMO, the larger the loss period they experienced.

③ GameStop (2021): In a community-driven frenzy, a stock price around $17 in early January soared to $483 intraday in just over ten days, then crashed 80–90% from the peak in less than two weeks.

What do the three events have in common? At the hottest moment, whoever jumped in last bore the deepest drawdown.

You can't eliminate emotion. But you can drain its power through 'structure.'

① Set rules in advance. If you decide 'when, how much, and how to buy' while calm, then even when your brain gets excited in a surging market, the rule serves as a brake.

② Buy in installments. Instead of betting it all at once, buying a set amount steadily in installments reduces the risk of loading everything at the top. This is why recurring investing is FOMO's natural enemy.

③ See the drawdown and recovery period in advance. Experiencing in numbers beforehand 'if I had bought at the top, how much would it have fallen, and how many years to recover?' calms the impatience sharply. 'The Return of Almost Everything' is a site I operate myself, and it shows the case of buying all at once versus in installments, and the maximum drawdown and recovery period during a crisis, without hiding them. Try using it to practice checking with cold records instead of a hot heart.