Your neighbor just made a fortune in crypto. Your coworker won't stop talking about the AI stock that doubled. Your social media feed is full of people showing off gains you didn't capture. The fear of missing out is real, and it's one of the most destructive forces in investing.
Why FOMO Is So Powerful
Humans are social creatures wired to compare ourselves to others. When we see someone succeeding, especially with something we could have done ourselves, it triggers a primal response. Our brains interpret their gain as our loss, even when it isn't.
This wouldn't be so dangerous if past performance predicted future results. But it doesn't. The investments that have done exceptionally well recently are, by definition, the ones most likely to be overvalued and due for disappointment.
The performance chasing cycle: Investment rises → Media covers it → Investors notice → Money flows in → Prices rise more → More investors notice → Peak euphoria → Smart money exits → Prices collapse → Chasers left holding the bag.
The Mathematics of Chasing
Consider a simple example: An investment doubles in year one, then drops 50% in year two. Someone who held throughout is back where they started. But the FOMO investor who bought at the peak after seeing year one's returns? They've lost half their money while the early investor lost nothing.
This isn't hypothetical. It's the pattern that plays out in bubble after bubble. The investors who make the most money are those who were positioned before the run-up. By the time something becomes widely discussed, the easy gains are gone.
What You Don't See
Nobody posts their losses on social media. The coworker bragging about their winning trade doesn't mention the five losers. The neighbor who made money in crypto probably also lost money in crypto, but you'll never hear about that.
This creates a warped perception of reality. It seems like everyone is getting rich except you. In truth, most people chasing hot investments underperform simple index funds. Study after study confirms this. The performance chasers, in aggregate, destroy wealth while feeling like they're pursuing it.
The Antidote
Define your own success: Your financial goals are personal. Progress toward them is the only metric that matters, not whether you outperformed your neighbor or captured some speculative gain.
Zoom out: Check your portfolio's performance over years, not days. A diversified portfolio will underperform the hottest investment in any given period. That's the price of diversification. It will also avoid the spectacular crashes.
Remember what you're optimizing for: Are you trying to maximize bragging rights or financial security? The strategies that optimize for each are very different.
Limit information intake: Every story about someone's spectacular gains is designed to trigger FOMO. Consume less financial media, especially the breathless coverage of whatever's hot right now.
The Quiet Path
The investors with the best outcomes are usually the most boring. They contribute regularly to diversified portfolios. They don't chase hot sectors or panic during downturns. They rarely have exciting stories to tell at parties.
They also retire comfortably while the performance chasers are still working.
The Zen Take
FOMO is the enemy of the long-term investor. It pushes you to buy high, abandon proven strategies, and take risks you don't understand. Every bubble in history was fueled by people afraid of being left behind.
The path to wealth isn't exciting. It's consistent savings, broad diversification, low costs, and patience. It means accepting that someone will always have done better than you recently, and being at peace with that.
Let others chase the headlines. Your job is to stay the course, ignore the noise, and trust the process. The market rewards patience. It punishes FOMO. Choose accordingly.