investment mistakes to avoid-FOLLOWING THE HERD
The most obvious example of investors following the herd is the technology boom of the late 1990s. At that time, sensible investment
strategies went out of the window and even pensioners relying on their investments for income were selling corporate bond funds and
moving into technology, not wanting to miss out on the easy money. In more recent times, investors have piled into gold and other
commodities. Remember: if an investment hits a record high, view it as a warning sign, not a reason to buy.
We are social animals who feel safer in numbers, but so do sheep. We take comfort in doing what everyone else is doing, and in the
back of our minds we know that even if we’re wrong, at least we’ll be wrong with a bunch of other people. But it was the same line of
thinking that led us to do very stupid things in high school just because “everyone else was doing it.”
Though we pride ourselves on rugged individualism, most human beings are deeply conformist. In stock-market parlance, we tend to be
trend followers, not trend leaders. Even stock analysts, who ostensibly get paid for independent thinking, generally echo the opinions of
other analysts — and often end up doing no better than guesswork at predicting prices. Imitating the people around us is one of our
most basic biological drives
Going against the herd can be extraordinarily difficult. Individual investors typically don’t have enough time for independent research.
And professionals risk their reputations if they stand up against the crowd. Is it worth it? Usually the answer is yes.
A lot of losses made by investors stem from blindly following a well respected investment expert despite mounting evidence on the
contrary. Blindly following the experts is a big mistake, a sickness of an independent mind. One should question the analysis of all
investment experts and rely on his own first-hand practical experience and hands-on research. That includes questioning the masters
from whom we have learned so much.
Five hundred years ago, the Buddha said: “Be a Light onto yourself!” Your teachers can help you and prepare you. But you have to the
one to light up your inner candle yourself.
Block out the noise. News and media outlets thrive on sensationalism. They also need to report new news usually on a daily basis.
Think back when the market was doing poorly in the in 2008 and the beginning of 2009. If you were reading the news, it felt like the
world was going to end. The tendency was to sell and at that point, the market was already down significantly. Getting too involved in
the news short term can make you forget that your investments are for the long term.