Monthly Market Insights: The FOMO Investing Trap

By Dr. Sylvia Kwan

A couple of weeks ago, I took my first ride in a fully automated self-driving car. Living in San Francisco, I frequently see self-driving cars, usually with a human sitting in the front passenger seat overseeing the ride. I applied to access one of the services and was thrilled when I was finally accepted — more than a year later. 

I requested a ride on the app and met up with my assigned car (let’s call her “SmartAuto”) at the pickup location. I unlocked the doors using the app, and stepped inside an empty, sleek, comfortable electric vehicle. I was immediately greeted by a friendly “Hello Sylvia!” along with a reminder to buckle up. SmartAuto then started our journey, and I was quickly awestruck by how incredible the experience was. The screen fascinated me: It was able to identify moving cars, parked cars, pedestrians, cyclists, and even dog walkers. SmartAuto successfully dodged double-parked cars, jaywalkers, scooters, and cyclists who seemed to appear out of nowhere. I was impressed. My first trip went off without a single hitch, and I was hooked — completely intoxicated with this amazing, technological wonder.

In investing, there’s always a “Shiny New Thing” with so much potential for disruption that it has yet to be imagined. It’s easy to get caught up in FOMO when everyone is talking, breathing, chasing, buying, and touting the promise of said Shiny New Thing. However, history tells us that the potential of that Shiny New Thing often takes time — years, even — to materialize. And jumping in at the earliest stages, while exciting, often doesn’t pan out to expectations. That’s because new technologies and innovation typically take time to mature and get de-risked. Only time will shake out who the winners and losers will be. 

While my first ride with SmartAuto was absolutely exhilarating, my next few trips … not so much. On trip two, instead of pulling over to drop me off at my destination, SmartAuto sped up and decided to go around the block one more time. On another trip, SmartAuto dropped me off partway up a very, very steep hill instead of at my destination, which was only 100 yards further at the top. And just this week, SmartAuto stopped right smack in front of the entrance to a parking garage to pick me up, blocking human drivers trying to enter and exit the garage! (OK, maybe SmartAuto behaves more like a human than I thought.)

Don’t get me wrong: I’m still a big fan of self-driving vehicles and all they represent to disrupt and improve daily life. These kinks and hiccups won’t deter me from continuing to use the service, but they are a reminder that first-out-of-the-gate innovations, ideas, and technologies — no matter how exciting — have many unknowns when operating in the real world. And it takes time, patience, and experience for these innovations to mature and be ready for prime time.

Remember when companies were the Shiny New Thing in the early 2000s?,, Webvan? At the time, billions of dollars were chasing any new internet-related start-up with a “” attached to its name. The demise of these three companies was swift and harsh. Investors collectively lost trillions across all the failed dot.coms. Today, companies like Chewy, Instacart, DoorDash, and others have become relevant in the same businesses where the early innovators failed. 

And today, there are many Shiny New Things: metaverse and virtual reality, Web 3.0 and 4.0, blockchain, crypto, NFTs. And, most recently, generative AI. While all the cool kids are talking about Stable Diffusion, ChatGPT, and Google’s Bard, the feeling of FOMO couldn’t be any stronger. The hype is driving AI-related tech stocks to new highs: The NASDAQ is up more than 30% year to date, followed by 16% for the S&P 500, while the DJIA is up only 4%. Tech has come roaring back, with anything involving AI leading the pack. More than $4.5 billion in venture dollars went into generative AI companies in 2022, and the global generative AI market is expected to reach $42.6 billion in 2023

But here’s the thing about investing: It doesn’t need to be exciting or exhilarating to be successful. In fact, investing should be downright boring most of the time. Fewer wild swings for the fences lead to greater peace of mind. And when it comes to long-term investing, time and patience are valuable allies which can keep you from making rash decisions that might derail your financial plan.  

Like AI, Shiny New Things usually have long runways of possibilities. That means there's plenty of time to invest intentionally down the line when more of the unknowns are known and early risks are mitigated. You don’t have to be among the first to invest to benefit from these trends. Google wasn’t the first search engine: Yahoo, Lycos, and AltaVista all existed before Google. Similarly, in social media, MySpace and Friendster all launched before Facebook. New technologies have a long runway, and investors have enjoyed financial returns all along the way. Just ask investors in Amazon or eBay, two survivors of the era.

So the next time you're tempted by FOMO to jump into the next Shiny New Thing, take a breath and don’t be rushed. History tells us that better opportunities often reveal themselves down the line, and they’ll reap the benefit of lessons learned from ‌early entrants. They say patience is a virtue, and it couldn’t be truer when it comes to long-term investing. So, I’ll wait for SmartAuto to get smarter about pickups and dropoffs before I shell out sums of money for the service. It'll happen — it’s just a matter of time. 

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Dr. Sylvia Kwan

Dr. Sylvia Kwan is the Chief Investment Officer of Ellevest.