Psychology of Investing – Part 2: Herd Instinct

Crowd behavior is one of the most powerful psychological forces influencing investor behavior. This tendency, sometimes called herd instinct, refers to the fear of “missing out” where an individual may make investments not because of careful analysis, but simply because a large group of others are doing the same. When markets are rising and optimism dominates headlines, many investors might feel a growing pressure to participate; the opposite holds true when markets decline.