5 behaviors shackle investment strategy

Following the herd
3 of 6
Following the herd

Following the latest investing fad and ignoring your specific goals can take you off the right course to fulfill your investment strategy and lifestyle needs.

David Krueger, author of "The Secret Language of Money," says that herd mentality, defined as the altered state of mind induced by the emotion of group momentum, is what happens when an individual investor abandons an investment plan in order to follow others in his or her peer group. Krueger says the emotional contagion can be due to -- and prolong -- a market bubble such as the Internet tech bubble of the late 1990s. It can cause emotional reaction in the opposite direction, such as the market crashes of 1929 and 2008.

According to Krueger, people make mistakes because they don't have a plan or don't stick to it when emotions run high.

"When herd mentality prevails, the emotion of the right brain holds sway over the logical and reasoned left brain, even at times seizing and holding it hostage," Krueger says. "Greed, emotional contagion and peer pressure trump logic."




Show Bankrate's community sharing policy
          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

Can heirs cash an old trust?

Dear Dr. Don, The youngest of 6 children, I am 48 years old. My father joined the Navy at 22. In Italy, he met his bride and my mother, and returned to the U.S. to raise our family. In 1959, he bought a trust certificate... Read more



Dr Don Taylor

Recognizing a loss to boost your yield

In taxable accounts, your capital losses can be used to offset your net long-term capital gains.  ... Read more

Partner Center

Connect with us