Written by Wealth Advisors Gregory Duffy and Joseph Piela, CFP®, this article explores FoMO (fear of missing out) and its similar affect PoGO (panic over getting out), in relation to investor behavior.

What is FoMO?

In recent years, the expression fear of missing out or FoMO, has entered the popular lexicon and social discourse, particularly among young people.

While FoMO is a generalized formulation, it begs the question: “Missing out on what?”. The “what” stems from the notion that some other individual, at that moment, may be having a more rewarding or fulfilling experience, which manifests in feelings of disaffection in the individual harboring FoMO.  This article explores FoMO and its similar affect PoGO (panic over getting out), in relation to investor behavior.

As the FoMO meme propagated, social scientists began to examine its origins and the factors behind its emergence. Early research focused on the rise of social media platforms (i.e. Facebook, Twitter) whose explosive growth mirrored the profusive and extensive use of easily accessible personalized digital devices. Highly portable smart phones and tablets provided both the means and the motivation for instantaneous connection among users virtually anywhere, anytime and with anyone.

In 2013, a group of academics conducted a series of surveys to assess how FoMO correlates to motivational, behavioral and well-being measures commonly used in peer accepted tests. Based on their analysis of survey responses from the groups studied, the researchers reported the following observations:


  • Participants measuring high in FoMO tendencies generally scored low in the three measures of the Self Determination Theory (SDT): competence, autonomy, and relatedness.
  • Those with high FoMO tendencies also exhibited greater reliance on social media to facilitate social engagement and increase their sense of relatedness. They also noted a recursively inverse relationship between social media engagement and social relatedness: greater use of social media was associated with lower SDT measures.
  • Among population groups, higher measures of FoMO were found among younger segments of the population, and within that segment, were skewed toward males compared to females. Also, males high in FoMO measures tended to engage in riskier activities compared to males having lower FoMO correlates.


Case in point: 20% of students surveyed with loans outstanding reported using their loans to fund investments in crypto-currencies like bitcoin, with males showing a higher reported use at 27% vs 16% of females.


FoMO and Investor Behavior

Since March 2009, the value of U.S. stocks as measured by the S&P 500 has increased over 360% at an annualized compound rate of 18.77% through January 2018. Despite the extraordinary performance of the S&P 500, the participation rate among individual investors receded over much of the period.

According to a Gallup survey published in May 2017, the percentage of survey respondents holding stocks during the current bull market declined to 54% compared to 62% of respondents reporting stock ownership up until the Great Recession. This held true across all age and income groups, with only those older than 65 and those reporting incomes greater than $100,000 showing a 1% increase in stock ownership between the two periods.

As the S&P 500 climbed higher during 2017, retail investors finally began to increase their exposure to equities and other risk assets. Discount brokerages reported increased client activity beginning in December 2017 which continued into January 2018.  Spokespersons from brokerage firms reported on the “strong performance of the market, gains in crypto-currencies, increases in cannabis investments, and ‘the fear of missing out’”.

In a paper written by De Marzo et al in 2007, the authors explain how relative wealth concerns cause investors to emulate the portfolio choices of their cohorts rather than trade against the crowd, providing a theoretical insight into (fo)motivated investor behavior.


From FoMO to PoGO?

Beginning in February, momentum in the equity markets reversed as the S&P 500 index declined by 3.69% during the month. In March, the S&P 500 fell 2.54% closing out the 1st quarter of 2018 with a decline of .76%, marking the first negative calendar quarter for the S&P 500 since September 2015.

Looking at money flows into the U.S. equity markets as measured by the Dow Jones Index, inflows surged by $12 billion from November 2017 to January 2018, driving the markets higher. In February, money flows reversed as investors pulled $29.4 billion out of ETFs and mutual funds during the three months ending March 31, 2018, suggesting fear of missing out (FoMO) was giving way to panic over getting out (PoGO). While the market has since recovered, corporate stock buybacks responding to lower corporate tax rates have led the rally.


Avoiding the FoMO – PoGO Merry-Go-Round

Whether an investor experiences FoMO or PoGO, the underlying motivation is fear. By exiting the market during the inevitable downward phase, such investors incur real losses, intensifying their regret and risk aversion. Then, as the market reverses course and starts to climb, they remain risk averse until the fear of missing out overwhelms the memory of their panic over getting out. Buying after the market has already made significant gains brings them full circle and positions them for a PoGO reaction when markets decline.

One way to resist being drawn into the FoMO – PoGO vortex is to refocus attention away from the urge to react. Resisting impulsive reaction is more easily accomplished if an investor has a well thought out investment policy to forestall rushing into a rash decision.

When constructed properly, an investment policy (IPS) establishes an investor’s behavioral risk coordinates based upon their need, ability and willingness to take market risk. These parameters form the basis of their portfolio allocation, and the time frame in which the portfolio will be maintained. Moreover, the IPS will emphasize the most important investor behaviors for success: consistent portfolio contributions, persistent adherence to their plan, and working with an advisor who is insistent about regular contributions and risk management discipline.

The acronym PoGO brings to mind Walt Kelly’s popular comic strip character, Pogo, who famously remarked, “We have met the enemy, and he is us”. In a similar vein, numerous articles citing academic studies make essentially the same point about investors: most are often their own worst enemies.  Fortunately, investors can avoid becoming their own worst enemies by working with an experienced and qualified investment advisor who will assist them in creating an investment policy (IPS) suited to their goals, financial circumstances and risk tolerance.


At Sax Wealth Advisors, we believe an investment plan should be defined by, and aligned with, a client’s life time aspirations and values. From there we design a long-term financial and investment plan based on a consistent application of investment principles and practices supported by academic research. To learn more about our process, visit www.saxwa.com.