Brian Dress, CFADirector of Research, Investment Advisor, Left Brain Wealth Management, LLC · Wealth Strategy for Corporate Executives & High-Net-Worth Investors | Concentrated Stock & Equity Compensation Planning | Director of Research | CFA | Left Brain Wealth Management

Combating Emotional Bias and FOMO: The Hidden Risks of Holding Too Much Company Stock

23 Jul 2025 · 2 min

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1:47

In this interview, the host and behavioral finance expert Robert Leonard discuss the psychological pitfalls that employees and executives face when holding large amounts of their own company’s stock. They identify several biases—emotional attachment, loyalty bias, the endowment effect, and fear of missing out (FOMO)—that cause individuals to overvalue their holdings and resist selling even when it may be financially prudent. Leonard stresses that these biases stem from an "inside view" shaped by daily corporate involvement, which blinds investors to broader market opportunities. He recommends engaging an independent, emotionally detached advisor to provide an "outside view" and to enforce diversification, reminding listeners that concentrating wealth in a single stock ignores the thousands of alternative investments available. The conversation serves as a practical guide for mitigating behavioral risk through objective advice and portfolio diversification.

Chapters

Let's talk about behavioral risks and emotional bias. So this is something that comes up all the time. You know, people work at these companies and they've got an emotional attachment to these companies. They're unlikely to wanna sell the stock because there's an emotional attachment there, Nolan. There's loyalty bias. There's what we call the endowment effect. So when you own something, you know, you consider it to have a higher value than it might actually have in actual fact. And then there's something called FOMO. We all know that word. In just general parlance, but the fear of missing out. So a lot of people think, okay, well, if I sell my stock and then it goes higher, I'm gonna feel really awful about that decision. How do you deal with those types of risks that seem to come into play when we're talking about company stock and owning our own company stock?
[Speaker:ROBERT_LEONARD] Yeah, so this is all behavior modification. It's really hard, you're right, because if you're a hard-charging, successful executive, then you're pretty much all in on your company. You know, it bleeds through your bloodstream. And you can feel it. And so it's really hard to separate the investment part from my love of, my dedication to, my affinity for. What I'm saying to all the investors, you must do that. You need an independent person with no emotional attachment to tell you if your company is a good investment or not. That's right. Because you are a bad judge of that, because you're in the corporate meetings, you know, well, we got this new product coming out, and Everybody's rooting against us, so it's us against the world. You don't understand how horrible— you don't, you know what I mean? So you have the inside view, but then there's an outside view. And generally what an investor is thinking about when they own the company stock is they're thinking about that stock and that company, but they're not thinking about the other 4,000 stocks they could own if their money wasn't all tied up in this one.