This week, I’m talking about behavioral finance to help you understand how your psychology and biases influence your money decisions. 

Today I’m talking about herd behavior. 

CS Lewis summed up herd behavior quite well when he said 'When the whole world is running towards a cliff, he who is running in the opposite direction appears to have lost his mind.”

But sometimes being a good investor requires that you run in the opposite direction. Herd behavior is so common, I don’t have to dig very deep to give you some good examples. If you weren’t buying bitcoin in late 2017, gold in 2011, or profitless tech stocks in the late 1990s, you probably felt like an idiot. If you weren’t flipping houses in 2005, you likewise felt like you had missed the boat. 

There is never a shortage of people out there who will brag about their massive wins, but you almost never hear about the other side...when that person was dead wrong, bet everything on a hunch, and then lost it all. 

If you’re not careful, herd behavior can cause you to make some bad decisions - like buying some hot stock when it’s way overpriced, or jumping into an investment opportunity without investigating whether or not it makes sense for you. When the stock market was down 30% in March and people at work are bragging about how they moved to cash right before Covid hit, it takes discipline to stay invested and ride things out. 

To avoid falling victim to herd behavior and making poor decisions as a result, it’s important to remember that the masses are often wrong - very often. I talked about this at length earlier this week, when we looked at the dismal long-term returns of the average investor. 

Your retirement is perhaps the most important financial decision you’ll ever make. You want to get it right. Well, so do I. For the last 13 years, I’ve been helping clients just like you make the transition into retirement. If you want to talk one-on-one with me about whether or not you can retire, head on over to truenorthra.com, where you can book a 15 minute call with me, at a time that’s convenient for you. The call is confidential, free, and I promise to help guide you on whatever is weighing most on your mind right now regarding your retirement. So head on over to truenorthra.com and book a call today. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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