Opinion: The ‘wisdom of crowds’ can cost you dearly when the stock market is in turmoil


It’s easy to become anxious as an investor.  It’s particularly easy to become anxious when war is erupting in Europe, stock markets are gyrating, inflation is spiking, and the Federal Reserve is raising interest rates to snuff out that inflation. 

So what do many investors do in times like this?  While we like to think that we’ll be rugged individualists and go our own way, too often we reflexively look around to see what everyone else, the great lowing herd of investors, is doing.  And then many of us will join that herd.

Herding in financial markets seems to make sense.  We’ve been taught that the “wisdom of crowds” will save us because the collective wisdom is supposedly greater than our own.  That’s an especially comforting thought during turmoil like that which we’ve experienced lately.  But herding – relying on “collective wisdom” – almost never saves us and nearly always hurts…

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