From FOMO to TMI: Three Myths About Investor Behavior
How fear of missing out, too much information and market volatility can affect your investing decisions — and what may help you stay focused.
Key Takeaways
FOMO — the fear of missing out — can make popular investments tempting, but chasing trends may pull you away from your long-term financial goals.
Too much information (TMI) can make investing feel more complicated, especially when market news seems urgent or conflicting.
Market declines can make taking action feel urgent, but sticking with a diversified long-term approach may help you stay focused.
You notice a headline about a stock that has doubled in six months and wonder if you should have invested in it. Your 401(k) balance declines after a tough week, prompting you to consider shifting to lower-risk assets. You come across an article that recommends buying now, while another warns that a market correction is imminent, leaving you unsure how to proceed.
If any of that sounds familiar, you’re not alone. These are among the most common experiences investors face, and they can subtly influence financial decisions through behavioral patterns.
Here’s a look at three common investing myths — and how a diversified, goals-oriented strategy may help you stay focused when FOMO or TMI create challenges.
Myth 1: Performance Alone Drives Investor Decisions
It starts with a familiar feeling. A coworker mentions a stock that’s up 40%. A social media post shows someone’s cryptocurrency gains. An investment you considered is suddenly at the top of the performance charts. You start to wonder whether your portfolio is keeping up.
That reaction is natural. In behavioral finance, it’s called regret aversion — the concern that you’ll regret missing an opportunity.
Crypto markets offer one example of how FOMO can influence investors. Online buzz around a fast-rising investment may tempt you to focus on others’ gains rather than whether the investment fits your long-term goals. But you don’t need to invest in crypto to recognize that feeling.
FOMO can show up when you chase a trending sector or increase exposure to a stock after a strong earnings report. It may also cause you to shift your 401(k) allocation based on what performed well last quarter instead of your long-term strategy.
Many retirement savers already use investments designed to ignore short-term performance. For example, more than half of 401(k) participants use target-date funds, which diversify investments and adjust allocations over time.1 That structure may help reduce the temptation to chase whatever is performing best right now.
Chasing strong performance can be tempting, especially when emotional investing takes over. FOMO often comes from regret aversion, or the worry that you’ll miss out on an opportunity. A broadly diversified strategy may help you stay focused on your long-term goals rather than reacting to short-term performance.
Myth 2: More Information Always Leads to Better Decisions
If FOMO makes you feel like you should act, TMI can make it harder to know what to do. Market alerts, competing headlines and conflicting expert opinions can quickly pile up, making investing decisions feel more urgent and complicated than they need to be.
It’s easy to assume that more information leads to better investment decisions. But that’s true only up to a point. Research suggests that when investors have too much information, it can become difficult to separate useful insight from market noise.2
This can happen even if you’re not a frequent trader. You might check your account balance more often during a market dip, rethink your investments after a bearish forecast or question your long-term plan because of one new data point. Those reactions are common, but too much information can make short-term news feel more important than it is.
One way to put financial information in context is to ask whether it actually applies to your situation. A market forecast, expert opinion or economic headline may be interesting, but it may not require a change to your portfolio. Before reacting, consider the source, your time horizon and whether the information affects your long-term goals. If it mainly creates urgency or uncertainty, it may be market noise rather than a reason to act.
Investment strategies designed to simplify decision-making may help reduce that pressure. Target-date funds, for example, rebalance automatically and adjust their allocations over time. They don’t eliminate market noise, but they may help reduce the need to react to every headline.
Too much information can make decisions harder. Consider whether the information is credible, relevant to your goals and meaningful over your time horizon — or whether it’s simply adding noise. Strategies that simplify investment choices may help you stay focused on long-term goals without feeling the need to react to every headline.
Myth 3: When Markets Fall, Most Investors Head for the Exits
When markets decline, FOMO and TMI can work together. Regret aversion may make it feel like others are getting out before you do. Information overload can make every headline seem urgent or contradictory. The impulse to do something — anything — is understandable.
But market downturns don’t always prompt investors to abandon their plans. Research on retirement savers suggests that many continue contributing and avoid major short-term changes, even during periods of market stress. That may be encouraging if volatility makes you question whether staying invested is realistic.3
This doesn’t mean downturns are easy. A sharp drop can make moving to cash or shifting to a more conservative option feel safer in the moment. If you’ve ever felt that urge, you’re not alone. That reaction is understandable, even if it could pull you away from your long-term goals.
A diversified portfolio can help by providing an investment strategy designed to weather different market conditions. It won’t eliminate losses or make volatility feel comfortable, but it may help reduce the pressure to react every time markets fall.
Market downturns can make taking action feel urgent. A well-diversified portfolio designed to manage volatility may help you stay focused on your long-term goals rather than reacting in the moment.
What Can Long-Term Investors Learn From These Myths?
FOMO, TMI and market volatility can all make investing feel more challenging than it needs to be. One can make you want to chase what’s working now rather than what has worked over time. Another can make every headline feel important. And market declines can make reacting feel safer than staying put.
A diversified, goals-based strategy may help reduce that pressure. Broad exposure can make it less tempting to chase individual winners, while a structured approach can help simplify decisions when information feels overwhelming.
That doesn’t mean you should ignore the markets. Instead, having an investment approach that doesn’t react to every headline, trend or short-term market move may be prudent. For long-term investors, that kind of structure may make it easier to stay focused on the goals that matter most.
Authors
Find the One Choice® Portfolio That Fits You
Learn how diversified portfolios can help simplify investment decisions and support long-term goals.
U.S. Government Accountability Office, “401(k) Retirement Plans: Department of Labor Should Update Guidance on Target Date Funds,” GAO-24-105364, March 2024; Investment Company Institute, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2022,” ICI Research Perspective 30, No. 3 (April 2024).
Alejandro Bernales, Marcela Valenzuela, and Ilknur Zer, “Effects of Information Overload on Financial Markets: How Much Is Too Much?” International Finance Discussion Papers, Board of Governors of the Federal Reserve System, March 2023.
Samita Thephasit and Michael Gropper, “A Longitudinal Analysis of Consistent Participants in the Public Retirement Research Lab Database, 2019–2021,” Employee Benefits Research Institute and National Association of Government Defined Contribution Administrators, August 8, 2024; Stephano Giglio, Matteo Maggiori, Johannes Stroebel, and Stephen Utkus, “Five Facts About Beliefs and Portfolios,” American Economic Review 111, No. 5 (May 2021): 1481–1522.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Diversification does not assure a profit nor does it protect against loss of principal.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.