There’s a great scene in Jurassic Park where Alan, Tim and Lex watch a stampede of dinosaurs suddenly change direction and head right toward them. What made them change direction? What made them decide that this new direction was any better?
Turns out investors do the same thing, just with their investments. As they sense other investors moving into the market, they follow. As investors move from bonds to stocks, others follow. There is a perception that there is safety in numbers. Both dinosaurs and investors tend to act as “herds”.
Problem is that it’s a misperception. Following the herd can cost investors in the end.
Remember to stick to your investment strategy and don’t follow the heard… they could be headed for a cliff and not even know it.