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FOMO vs. FOBO: Which is Worse?

April 26, 2024

In today’s fast-paced world, where every decision seems crucial and every opportunity feels fleeting, two acronyms dominate our psychological landscape: FOMO and FOBO. Fear of Missing Out (FOMO) is a well-known concept, but its lesser-known counterpart, Fear of Better Options (FOBO), often lurks beneath the surface, influencing our choices in profound ways. But which is truly worse? Let’s delve into the depths of these phenomena to find out. 

Defining FOBO: 

FOBO, coined by US venture capitalist Patrick McGinnis, describes the paralyzing fear that there might be a better choice out there, leading to over analysis and indecision. It’s that evening where you spend hours scrolling through Netflix, only to end up not watching anything because you can’t commit to a single option. While this might seem like a minor inconvenience, FOBO extends into more significant areas of our lives, making decision-making stressful not only for ourselves but also for those around us. 

McGinnis suggests that FOBO is deeply rooted in our DNA, stemming from our ancestors’ instinct to wait for the best possible outcome to ensure their survival. However, in today’s hyperconnected world, where limitless options are just a click away, FOBO is exacerbated. The abundance of choices, coupled with the ease of comparison facilitated by technology, amplifies our fear of making the wrong decision. 

I was talking to a friend last year who was having trouble deciding between an S&P 500 Index fund or a Total Stock Market Index Fund. I let him know he couldn’t go wrong with either of these as they are both great, low-cost options that younger investors can essentially hold for eternity. The problem is, he couldn’t decide which was best for him and never bought into either fund, therefore missing the wonderful market gains throughout 2023. This is the definition of paralysis by analysis, as the more we overthink, the easier it becomes to mourn what could have been, making it increasingly difficult to decide. 

Defining FOMO: 

While FOBO encapsulates the fear of making the wrong choice, Fear of Missing Out (FOMO) embodies the anxiety of missing out on rewarding experiences or opportunities. In today’s digital age, fueled by social media and constant connectivity, FOMO is pervasive, gnawing at our subconscious as we scroll through curated feeds filled with snapshots of others’ seemingly perfect lives. It’s the feeling of inadequacy that washes over us when we see friends attending events or embarking on adventures while we’re left behind. 

“Psychologists began using the term FOMO in the early 2000s to describe a phenomenon associated with the use of social networking sites. It has gained greater attention over the years as our social media presence has increased,” says Dr. Natalie Christine Dattilo, Ph.D, a clinical psychologist and instructor of psychology at Harvard Medical School.   

Unlike FOBO, which manifests as hesitation and indecision, FOMO drives us to overcommit and overextend ourselves in a frantic attempt to keep up with the perceived excitement and fulfillment of others. In a financial sense, it’s the impulsive urge to buy into a hot stock, or else face the consequence of watching your neighbors get rich.  

Remember the GameStop short squeeze debacle? It was like the wildest rollercoaster ride on Wall Street, where everyday folks banded together on Reddit to give hedge funds a run for their money. Suddenly, everyone and their grandma were glued to their screens, refreshing their trading apps, jumping on the rocket ship to financial freedom, only to be left holding the bag when the stock inevitably cratered. So, while FOMO might tempt you to throw your life savings into the latest stock craze, just remember sometimes it's better to sit back, grab some popcorn, and enjoy the show from a safe distance. 

Which is worse? 

The answer isn't straightforward, as both FOMO and FOBO wield significant influence over our lives, each with its own set of consequences and challenges. Trying to answer this question is essentially trying to determine if greed is worse than fear. In a financial sense, they can both cause devastating financial losses. The better question we should be asking is: which is worse for me? The answer... it depends. 

FOBO, with its grip of indecision and analysis paralysis, can prevent us from taking action and capitalizing on opportunities. It leaves us stranded in a sea of choices, unable to commit to a path for fear of missing out on something better. The tale of my friend torn between index funds is a perfect example of how FOBO can rob us of potential gains and growth, trapping us in a cycle of hesitation and regret. In the financial world, we refer to this as “getting sidelined”.  

Investors that most often display FOBO are conservative investors. Investors that are more focused on wealth preservation typically have a stronger response to fear than greed. They prefer certainty vs. uncertainty and when presented with a new investment or decision, tend to stick with what they know.  

On the other hand, FOMO pulls us in the opposite direction, driving us to overextend ourselves in pursuit of fleeting validation and excitement. It's the relentless pressure to keep up with the financial gains of others, often at the expense of our own well-being and risk profile. While FOMO may feel like an exciting adventure, it can also lead to buying into an overbought asset that is due for a correction. In the financial world, we refer to this as “buying the top”. 

Investors that typically display FOMO tend to be your more aggressive investors. Investors who prioritize maximizing their growth as much as possible. They tend to be driven by greed and when given a proposition of chance, they tend to focus on the potential gain rather than the possible loss.  

In the end, perhaps it's not a matter of which is worse, but rather how we harness the lessons embedded within both FOMO and FOBO to live more intentionally and authentically. By cultivating self-awareness, embracing uncertainty, and committing to our chosen paths, we can navigate the complexities of modern life with resilience and grace. So, whether faced with the allure of what could be or the fear of what might be lost, remember that the power to choose lies within each of us. It's not about avoiding FOMO or FOBO entirely, but rather accepting that it is in our human nature and being aware of their presence. Once we acknowledge their existence, we can create solutions to combat them. 

 

 

 

Disclosures

This material has been prepared for informational purposes only and should not be construed as a solicitation to effect, or attempt to effect, either transactions in securities or the rendering of personalized investment advice. This material is not intended to provide, and should not be relied on for tax, legal, investment, accounting, or other financial advice. You should consult your own tax, legal, financial, and accounting advisors before engaging in any transaction. Asset allocation and diversification do not guarantee a profit or protect against a loss. All references to potential future developments or outcomes are strictly the views and opinions of Richard W. Paul & Associates and in no way promise, guarantee, or seek to predict with any certainty what may or may not occur in various economies and investment markets. Past performance is not necessarily indicative of future performance.