Written by: Tony Genua, Jonathan Lo | AGF
No FOMO
It was once quipped “the only function of economic forecasting is to make astrology look respectable”. John
Kenneth Galbraith, famed economist and diplomat, summed up the state of forecasters with his quote - “We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know”. Indeed, following consensus market predictions can sometimes accumulate into herd mentality, whereby investors follow what they perceive others to be doing, for fear of missing out (FOMO).
FOMO is a feeling experienced by many individuals in today’s society on various aspects of life and is especially prevalent in the financial community. The media and social media have contributed to this phenomenon by providing a constant stream of information and updates on what others are doing. FOMO can lead to anxiety, stress and even depression, as individuals feel pressure to keep up with the latest trends, social activities and of course, in keeping pace with the financial returns offered in the capital markets.
In the investment world, it is essential to recognise and stay focused on one’s priorities and goals to alleviate the fear of missing out and to avoid the pitfalls of FOMO and buying near or at the top. Over the past decade, we have seen periods of FOMO come and go – from marijuana stocks, to cryptocurrencies, to “meme” stocks where those with high levels of short interest saw short-lived enormous spikes in asset prices. However, since the stock market peaked at the beginning of 2022, it appears there has been an evaporation of FOMO.
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