Investor Psychology: Your Brain is Hardwired to 'Follow the Herd' | Steadfast Finances

Another great Steadfast Finances post (with some cool videos too!)

Investor Psychology: Your Brain is Hardwired to 'Follow the Herd' | Steadfast Finances:

"This is because herding behavior is a result of not being in the know in any given situation. If you don’t know what’s going on, you begin to rely upon those around you who do. After all, there has to be someone out there who does, so why not follow along with him or her? If they screw up, then you can say it was their dumb idea and you’re not the only sucker who got fooled. Once again, you’re anxiety free since you’re back within the safety of the group a second time.

So it’s fairly commonplace to witness the old adage “there is safety in numbers” rule most daily of our lives."

Which is almost exactly what we have been saying in class. The more uncertainty and the more we are paid for relative performance, the more we are apt to follow the crowd.