As a business owner, or in your everyday personal life, you’re likely used to making independent decisions about what’s best for the business or your family.
You probably feel very comfortable in this role, confident that you have the know-how and experience to, at the very least, take your best educated guess as to what the right path is.
Conversely, it can be tempting to take a “follow the herd” approach when it comes to your investments. Read on to find out more about why this happens, and how to resist it.
Mirroring others’ investing behaviour can feel reassuring but isn’t always a rewarding path
Movement in the markets can often create sensationalist headlines, especially when times are volatile.
There have been many such occasions in recent years, with President Trump’s trade tariffs causing turmoil, and conflicts in Ukraine and the Middle East also having repercussions on the markets.
If all you’re doing is reading the headlines, then it’s understandable that you’ll feel nervous about your investments. It’s unlikely that you’ll have the time or inclination to do comprehensive research every time there’s a dip, and this is when panic can set in.
In turn, this can lead to a “herd mentality” of following the crowd, rather than relying on either your own analysis or taking professional financial advice.
It can lead to you:
- Buying when others are buying
- Selling when they are selling
- Ignoring your long-term financial strategy in the face of the “moment”.
Buying when others are buying could mean you’ll be paying higher prices, and selling when others are selling may mean you’ll be getting a lower price.
It’s highly unlikely you’d even contemplate this type of behaviour in other walks of life, but in the investment arena it’s surprisingly common.
However, it’s not irrational behaviour. There’s a tendency to feel that others will always know more, and when decisions feel difficult or complex, there’s a certain comfort in feeling like you’re at least in the same boat as everyone else.
The 3 psychological drivers at the heart of herd mentality
1. Fear of missing out (FOMO)
Although this is a relatively new phrase, it perfectly sums up one of the main reasons investors follow the crowd.
Fear of missing out on the right time to cash in, the latest trend, or anything that others are getting, can drive you to make decisions that don’t necessarily align with your own financial strategy or objectives.
2. Regret
For some people, missing out on a great investment return can feel even worse than actively losing money. This can be especially profound if others are benefiting from the investment. This is regret from inaction.
You can also experience regret from action, if you make the investment but lose money.
This is where herd mentality can kick in. You hear others around you talking about an investment, seeming confident, and making gains, and it feels like a mistake not to get involved.
In these cases, even if the investment isn’t in line with your established strategy and doesn’t match your approach to risk, you decide to go ahead anyway, so you don’t miss out.
If the investment doesn’t work out, it can still feel somehow comforting not being the only one to lose out.
3. Social proof
If you’re uncertain about something, it can be common to use other people’s behaviour to guide your own, especially if they seem confident in their decision-making.
Under these circumstances, you can feel as though you’re reducing risk by following the lead of somebody you see as more knowledgeable than yourself. In reality, you’re just relinquishing control.
A good example of this is the dotcom bubble. During the late 1990s, investors poured billions into startup companies with very little evidence of profits or success. But the “everyone is investing in tech” mentality quickly gathered pace.
However, in the early 2000s, many of the dotcom companies went bankrupt and investors lost a significant amount of money.
Get in touch
While herd mentality is understandable, it’s important that you have agency over your own finances. We can help you create and follow a financial strategy that aligns with your own values, circumstances, and lifestyle aspirations.
Please email us at info@servoprivatewealth.com or call 01444 715200 to find out more.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Any links will direct to a third-party website and Servo Private Wealth is not responsible for the accuracy of the information or content contained within linked sites.
Approved by Best Practice IFA Group Limited on 17/04/2026.