What is herd mentality? Find out how it can significantly hurt your portfolio and diminish your returns.
Welcome to Arista Advice. Today's topic is herd mentality.
What we mean by that is when things are all going great, fine, and dandy, everything's euphoric, people tend to pour money into investments. When things are panic-stricken, and everyone's freaking out, people pull all their money out of investments.
When looking at historical rates of return, people that have been subject to herd mentality have underperformed in the market. They've averaged 5.5% rate of return. When people are going against the herd and putting money in when others are fearful, their outperforming achieving a 14.8% rate of return.
As Warren Buffett has said, "Be fearful when others are greedy. Be greedy when others are fearful." He's a wise man. We encourage you to stay the course, stay disciplined, stay invested. Have a great day.