There are many occasions during our day-to-day that we are simply another member of the herd. Waiting in line at the grocery store; on the highway in rush hour; entering or leaving a sporting event; or how about boarding an airplane!
Some of these circumstances, like an airplane, are necessary for an orderly and safe outcome. Yet many of these circumstances are not necessary and may irritate some of us. Sitting in rush hour is certainly one of those examples for me, but to others this is a very normal and expected circumstance.
Our investing behaviors are similarly influenced by others. Sometimes this is without our conscious efforts while other times it is.
We see examples of the conscious herd goers all the time, depending upon whatever the latest "hot thing" is. At present, anything to do with technology has the herd goers attention, while yesterday it was something else. Many folks have done extremely well in these holdings, and these are the herd goers you hear from the loudest. Yet, what about the others, the ones you don't hear from? How do you think they have done?
Herding happens unconsciously sometimes in things like our 401k plans at work. These plans are typically finite in the number of fund choices (for good intentions) offered, yet this forces the majority of the participants into a small number of the same investments....a herd! Because 401k plans are normally pretty conservative in nature, this herd's risk is usually less extreme than the examples above, yet can still exist. So be aware that you may be part of a herd even when you don't realize it.
What should one do? In short: stay diversified, stay the course, and stay diligent. We normally hear these words in times of trouble...reminders in the midst of a recession or market correction that staying in the market over time versus trying to time the market is the best approach. Yet, today we find ourselves in quite a different environment. One of exuberance versus despair. Still the formula is the same: stay diversified, rebalance to your risk tolerance, and stay invested. We can no more predict the end of this historic bull market than were we able to predict its beginning.
Watch out for herd that tries like heck to take you off this road!
Focus Financial Network, Inc.
1000 Shelard Parkway, Suite 300
Minneapolis, MN 55426
952-225-0344 direct | 952-591-9770 main office
Securities offered through Royal Alliance Associates, Inc., member FINRA/SIPC. Advisory services offered through Focus Financial Network, Inc., a registered investment advisor.
Royal Alliance Associates, Inc. does not provide tax or legal advice.