When hordes of people are rushing to snap up a particular investment, it’s hard to believe they could all be wrong. It can also be hard to live with the fear of missing out. Yet the bursting of the internet bubble in 2000 showed just how dangerous this behaviour can be.
Investors who follow the herd tend to sell frequently in order to invest in the latest trend. But, by the time they invest, it could be too late to benefit and the leaders might already have moved on.
They might also miss out on mid- to long-term gains on their original investment. Potential profits could also be eroded by the cost of so many transactions.
It’s important to do thorough research and seek advice before jumping on an investment bandwagon.