Herd mentality, or mob mentality, describes how people are influenced by their peers to adopt certain behaviors.
Generally, investor’s decisions are heavily influenced by the actions of friends, co-workers, or relatives. Thus, if everybody around is investing in a particular stock, bond, real estate, etc, the tendency for potential investors is to do the same. This in turn leads investors into bubbles. Herd Mentality is bound to backfire in the long run.
No need to say that you should always avoid having the herd mentality if you don’t want to lose your hard-earned money in stock markets. The world’s greatest investor Warren Buffett was surely not wrong when he said, “Be fearful when others are greedy, and be greedy when others are fearful!”.