Fear of Missing Out Is the Main Driving Force in The Market
Researchers have been wondering about what could be the main driving force in the financial market. Motivation or passion could be listed as some of them, but it seems there is one that beats all other driving forces that make us want to buy stocks or invest in companies.
The most powerful force in the market is fear, and there are two main types of fear that are motivating the market: fear of losing and fear of missing out (FOMO). The first one creates powerful downside momentum while the latter creates a powerful upside. The feeling you get while recent market action look ideal, is certainly creating a small sense of FOMO in each and every one of us.
Where is a piece of it for me too?
Investors practicing this method will increase positions or purchase these newly lower-priced stocks to capitalize on what they hope will be a coming upswing in prices.
The concept of buying the dips is based on the theory of market fluctuation. When an investor purchases stocks after there has been a dip, they are purchasing shares at a discounted price. These investors are counting on the market rebounding and being able to take advantage when the price reverses. Investors could potentially garner a large return on investments made using this strategy.
Fear of missing out drives most money managers that look to make up underperformance by chasing stocks that will hopefully move up faster than the overall market. One of the examples of stocks like these is Facebook. Guessing and analyzing which stocks could eventually move faster is a matter of momentum, so whenever there’s a slightest sign or action that makes you think :” I can’t miss this opportunity!”, your brain was just fueled by the strong force of FOMO.
On the other hand, fear of missing out also drives dip buying. The concept of buying the dips is rooted in the theory of market fluctuation. Buying stocks when there’s a dip practically makes an investor purchasing stocks at a “discounted price”. So, FOMO will motivate an investor to purchase stocks, the same way it would entice a person to buy something on a “great deal price”.
So, now that you know what stands behind every investors urge to buy and to sometimes make a rushed decision, maybe double think before letting that emotion of fear change your approach to market.