Ever felt the urge to follow the crowd when investing? That’s herd mentality at play. Let’s explore its impact with some eye-opening facts!
A study by Barber and Odean found that individual investors who follow the herd tend to earn 3.5% less than the market annually.
(Barber, B. M., & Odean, T. (2000). “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors.” The Journal of Finance.)
During the dot-com bubble, herd mentality led to massive investments in tech stocks, resulting in significant losses when the bubble burst.
Making independent, well-researched decisions can shield you from the pitfalls of herd mentality. Diversification and long-term planning are key.
Have you ever followed the herd in investing? Share your experiences!
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