Wednesday, June 10, 2015

Term of the Day: Herd Instinct

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June 10, 2015
Herd Instinct

A mentality characterized by a lack of individual decision-making or thoughtfulness, causing people to think and act in the same way as the majority of those around them. In finance, a herd instinct would relate to instances in which individuals gravitate to the same or similar investments, based almost solely on the fact that many others are investing in those stocks. The fear of regret of missing out on a good investment is often a driving force behind herd instinct.

Investopedia Explains:

Also known as herding, such investor behavior can often cause large, unsubstantiated rallies or sell-offs...

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