Humankind has a propensity to have their individual thoughts sacrificed when it comes to buying stocks. Their ability to make individual decision is short-circuited by the overwhelming pressure of collective opinion.
Man by default think in a ‘crowd’ mentality and like every crowd or herds of animals like cows, swine in a flow of fit, they most of the time go mad and only return to their senses slowly but individually.
Gustave Le Bon writing on the characteristics of the crowd mentality sees it this way:
“…The turning in a fixed direction of the ideas and sentiments of
individuals composing such a crowd and the disappearance of
their Personality. The crowd is always dominated by consideration
of which It is unconscious. The disappearance of brain activity
and the predominance of medullar activity. The lowering of
intelligence and the complete transformation of sentiments
-the transformed sentiment may be better or worse than those
of the individual of which the crowd is composed.
A crowd is as easily heroic or criminal.”
Investors are drawn from a wide variety of background, have different level of intelligence and in many ways have little in common. The catch is that it is surprising how these diverse groups of people frequently cluster together to take a view on the market and the dept to which this view changes, and collectively changes too.
One assumed sensible season for crowd behavior is that following crowd is seen as a means of attaching the investor to the market momentum. For as long the momentum is flowing in one direction and money can be made by following that direction, there is little to suggest irrationality. The problems arise over this crowd mentality that can be deemed irrational. This is when the pressure of the crowd causes prices to rise or fall way beyond any basis that reflects the underlying business of companies listed on the stock exchange.
-Written by OKOYE OKECHUKWU PIUS.
Mr. Okoye O. Pius is a Maverick, Investment Consultant/Stock Market Analyst And Publisher ‘Ultimate Investors Edge’ Online Newsletter with a mission to:
“Help you make better investment decisions possible"
Developed and Originated the 'MVSS' Stock Trading Strategy.
Also an author, internet marketer, seminar speaker and host.
http://investtoprofitfromstocks.
blogspot.com/
Email:ultimatewealthmastermind@gmail.com
Contact number:+2347069545121
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