FOMO is the fear of missing out. In late stages of a bull market people see others getting great returns and decide to either come back into the equity markets or jump into equity markets for the first time.
Hearing that others are making great returns drives these "late entrants" to throw in the towel of being conservative and get into the market. Usually, it is EXACTLY the wrong time to make this move.
One of the metrics I follow is Cash Track from Lipper. The Cash Track chart is attached. It has four charts. In the upper left corner, the flows into and out of equity funds is shown. For a while many investors have been pulling back in a big way from equity mutual funds. Well, just recently the net inflow INTO equity funds has taken off in a large way - just as markets are cresting! This appears to me as a strong indication of FOMO.
Be careful at this point, as FOMO can inflict severe damage to a portfolio. Getting in late and then having the market fall can be hazardous to portfolio wealth! If the market drops, two things can happen. Those who just got in and become nervous as "a long tailed cat in a room of rocking chairs" suddenly sell and create a real loss. Those who just got in and don't sell, don't realize a real loss, but put themselves into the position of having bought at high levels. This means it can take years to recover from a case of FOMO.
Don’t let this be you!
Be smart, be well read and be successful!
