What is Herd Instinct?
A herd instinct is emotional pressure to agree with other members of a group. The herd instinct results in failures to think critically about an, situation or decision.
How Does Herd Instinct Work?
One day, Jeff proposes buying fund. He plans to make a large buy and says he likes the company's fundamentals. John and Jane go along with the plan and buy the for their , too. Two weeks later, the stock has fallen by 50%.of ABC Company for his
John, Jane and Jeff are the victims of the herd instinct. They didn't independently analyze the stock and instead relied on everyone else in the group to point out flaws in Jeff's thinking.
Why Does Herd Instinct Matter?
In the groupthink is akin to herd instinct. Knowing how to recognize the herd instinct provides a tremendous opportunity for contrarians to recognize when investors are buying or selling without thinking. This allows contrarians to question trends and even go in the opposite direction.world,
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Each week, one of our investing experts answers a reader's question in our InvestingAnswers' Q&A column. It's all part of our mission to help consumers...Read More →
We saw the effect of foreign policy on both the U.S. dollar and the New York Stock Exchange when the EU announced a multi-...Read More →
Back in the late 1990s, little old ladies became stock-picking experts. The local mailman was just as comfortable recommending Lucent and AOL as he was talking about the weekend forecast. ...Read More →