Are You Investing in Stock, Avoid this Herd Mentality

✅ One of the fastest ways to lose money in the stock market is by blindly following the crowd. We call this behaviour a herd mentality. Let me break it down properly.

❇️ What Is Herd Mentality in the Stock Market?

Herd mentality occurs when you buy or sell a particular stock simply because other people are doing the same, or because you read somewhere that you should do so, not because you’re doing it based on research or the guidance of your personal investment advisor. In this case, you are not making an informed decision; you are merely following the crowd in an attempt to seize an opportunity you heard about somewhere. It’s herd mentality.

❇️ This Is How Herd Mentality Shows Up:

It often happens during market rallies. Market rally is when a particular stock is trending on social media, and so you rush to buy. As many people are buying, the price of the stock rises, so you jump in out of FOMO (Fear of Missing Out). You don’t check the fundamentals, you just buy, even when the stock is already unnecessary expensive.

How to Avoid Herd Mentality:

1️⃣ Invest Based on Fundamentals:

Before you buy any stock, ask yourself these important questions: Is the stock undervalued or overpriced? And so on? If you can’t answer, don’t buy. In my February Investment Class, holding on Saturday the 28th, I’ll explain the simplest and most effective way to do this.

2️⃣ Ignore the Noise, Focus on Value:

These days, the stock market is noisy. Stock hyping, rumour and speculation everywhere on the social media. But if you are in for the long-term, focus on company performance, not short-term excitement. 

3️⃣ Have a Clear Investment Plan:

This is very important. Before investing, ask yourself: Why am I buying this stock? How long will I hold it? When will I sell? A clear plan protects you from emotional decisions. 

4️⃣ Be Comfortable Standing Alone:

Some of the best investments feel uncomfortable at first. Nobody is talking about the stock. The price looks boring. Yet, that’s often where real value is hiding. I’m telling you this for free, but if you want to know more, register for my upcoming investment class.

❇️ The truth is simple: the stock market rewards independent thinking, not group behaviour. When everyone is rushing in, slow down. When everyone is panicking, analyse carefully. If you want to succeed in stock investing, think independently, control your emotions, and follow facts and data, not hype. Avoid the herd. That’s where most losses happen.

©️ Abiodun Olusola