What it is:
A herd instinct is emotional pressure to agree with other members of a group. The herd instinct results in failures to think critically about an, situation or decision.
How it works (Example):
One day, Jeff proposes buying fund. He plans to make a large buy and says he likes the company's fundamentals. John and Jane go along with the plan and buy the for their , too. Two weeks later, the stock has fallen by 50%.of ABC Company for his
John, Jane and Jeff are the victims of the herd instinct. They didn't independently analyze the stock and instead relied on everyone else in the group to point out flaws in Jeff's thinking.
Why it Matters:
In the groupthink is akin to herd instinct. Knowing how to recognize the herd instinct provides a tremendous opportunity for contrarians to recognize when investors are buying or selling without thinking. This allows contrarians to question trends and even go in the opposite direction.world,