FOMO, Crypto, and Chasing Returns

'Everyone's getting rich' is a feeling, not a strategy. What the evidence on return-chasing actually shows — including where it disagrees.

Every few years an asset goes vertical, and the same feeling returns: everyone seems to be getting rich except you. That feeling — FOMO, the fear of missing out — is one of the most reliable ways to lose money. This spoke sits under the Money psychology hub.

FOMO is a feeling, not a strategy

FOMO borrows the same wiring as loss aversion: watching others gain registers like a loss you are suffering, so you act to make the feeling stop — usually by buying something after it has already run up.

Notice the tell. FOMO is loudest after a big rise, which is exactly when the enthusiasm is already in the price. The feeling and the risk peak together, and the feeling insists on the opposite.

What chasing actually costs — and why the number is disputed

Here is a place where we could give you one confident figure, and most sites do. We are not going to, because the two most credible estimates differ by more than tenfold.

The disagreement is about method — whether a dollar-weighted return gap really captures "bad timing", or partly captures the fact that money flows into funds as they grow. It matters, and it is unresolved.

What all three agree on: the cost is not negative. Nobody has ever found that trading more, chasing harder, or piling in after a run makes the average investor money. The honest range is "somewhere between a small drag and a serious one" — and the advice is identical at either end.

Herding and bubbles, minus the folklore

Markets are crowds as well as numbers, and prices really can detach from any defensible value. The dot-com collapse is the well-documented modern case: real companies, real capital, valuations that could not be justified by any plausible cash flow, and a drawdown that took the Nasdaq roughly fifteen years to recover in nominal terms.

But we have quietly retired one example this page used to lean on. Tulipmania is mostly a myth. The historian Anne Goldgar spent years in the Dutch archives and found the tulip trade of the 1630s involved a fairly small circle of merchants and craftsmen, produced no broad economic collapse, and left almost no bankruptcies — she could not find a single person ruined by it. The famous images of servants mortgaging their futures and chimney-sweeps trading bulbs come from 17th-century moralising pamphlets, laundered into "history" by Charles Mackay's Extraordinary Popular Delusions in 1841.

That correction matters more than it looks. If your case against speculating rests on a story that turns out to be propaganda, the case is weaker than you thought — and the reader who finds that out stops trusting the rest. The argument against buying after a run does not need tulips. It needs only this: the price already contains the excitement, and you are late.

The other honest caveat: noticing a bubble and timing one are different skills, and almost nobody has the second. "This looks overpriced" has been correct and unprofitable for years at a stretch. Which is precisely why the answer is a rule about position size, not a call on the top.

The plain rule: cap the fun money

You do not have to swear off speculation. You have to contain it.

• Decide the cap in advance, while nothing is going up. An amount you could lose entirely without changing your retirement date, your contributions, or your sleep.
• Never top it up because it went up. That is FOMO wearing a spreadsheet.
• Keep it structurally separate from the retirement accounts and the automated plan. Different account, different mental bucket.
• Write the thesis down before you buy, including what would prove you wrong. FOMO cannot pass this test, because its only argument is the recent price.

That single rule turns FOMO from a threat to your retirement into a hobby with a budget. Meanwhile the boring part keeps running: automate the core, escalate with raises, and let present bias work for you instead of against you.

Key takeaways

• FOMO peaks after big rises — when risk is highest, not lowest.
• The cost of chasing is real but genuinely disputed: roughly 0.1 to 1.2 percentage points a year depending on how you measure. No credible estimate says chasing pays.
• Tulipmania is largely a myth. Bubbles are real; the folklore around them is not, and neither is anyone's ability to time them.
• Cap speculation at money whose loss would not change your plan, decide the cap before the rally, and never top it up.

Educational only — not financial advice.