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The FOMO JOMO Portfolio Nexus

New terms are entering our lexicon at a faster and faster rate. In a nod to the newer generation, we’ll acknowledge and delve into two of the more popular phrases coined in the last few years:   Fear of Missing Out and Joy of Missing Out.

To paraphrase from Wikipedia, Fear of Missing Out (or “FOMO”) is “the pervasive apprehension that others might be having rewarding experiences from which you are absent.”  

Apparently, there are numerous types of FOMO – including Friday Night FOMO, Vacation FOMO, Bucket List FOMO and yes, even Investment FOMO.   Additionally, marketers of all types have cleverly jumped on the FOMO bandwagon to get potential customers by promising that we won’t miss out on the latest trends, thus making it difficult to get through the modern day without feeling like we’ve missed out on something really important and rewarding.

But coming to the rescue, on the other side of the ledger, we have the Joy of Missing Out, or “JOMO.”  The thinking behind JOMO is that a lot of the FOMO stuff that we’re allegedly missing out on is mostly hype, superficial or not that important at the end of the day.  JOMO proponents typically argue for less connectivity, a slower pace and focusing more on yourself and what you want to do and less on others and what they might be doing.

As social creatures, part of being human means dealing with FOMO.  But we’re also capable of independent thought and action, so we have a foot in the JOMO camp as well.

As investors, we want to have our cake and eat it, too: we ideally only want gains and would like to avoid all decreases in value. How great it would be to have a portfolio that could simultaneously accomplish both things? Sadly, we know that’s impossible. A better tactic would be to spend some time trying to find our own personal FOMO-JOMO nexus point.   

We know that in broad terms, an investor’s stock-to-bond ratio is a very strong determinant of both their long-term returns and the (sometimes unpleasant) accompanying volatility.   Stocks help you avoid FOMO when the market runs up, while bonds help you enjoy JOMO when the market takes a down-turn.

But what’s the right stock/bond mix?   It depends entirely on the investor.   This is where it is helpful for investors try to find a mix that works for them.  In the long run, this is a much more useful exercise than reacting to market movements or changing your strategy every time the market makes a sharp move.

At Woodward, we are here to help.   This project might take a little effort and should include the consideration of both quantitative and qualitative factors.  You’ll have to give some real thought to the tradeoffs that you’re willing to make, and you’ll have to balance your FOMO on higher returns with your JOMO on market declines. While it’s not an exact science, perhaps this construct can help you move closer to a portfolio that gets you to a point of maximum relative comfort.