Ever attended a “most talked about” investment seminar, listened to the same hot stock/sector being praised, and walked out thinking—“Is this truly that special, or is it just the hype?”
That name, that fame, and the packed hall full of people nodding along are all signs of the bandwagon effect— commonly known as herd mentality.

Following Trends, Even in Markets:

As social beings, human psychology follows common trends, styles, and attitudes simply because others are doing so, and this convincing phenomenon even seeps its way into economies.

The history of financial markets offers a set of examples where the bandwagon effect has led to misjudgment, extensive trading, and the overhyping of an asset or an asset class. “Doing it because everyone is doing it.”

Japan Bubble: Herd Behaviour in Action

Japan’s late-1980s asset bubble is a classic example: speculation and herd mentality inflated real estate and stock prices, and when the bubble burst in the early 1990s, Japan entered years of stagnation.

Break the Herd: Think Independently

• Being born as humans, we do tend to follow the crowd, the news, and the herd. This may lead us to invest in whatever is trending in the market.
• Apart from market charts and numbers, to navigate the bandwagon effect, investors must follow independent analysis and critical
  thinking.
• This means looking beyond current news and assessing the underlying fundamental factors, such as the asset’s financial health, market position, and broader industry dynamics.

Get Objective Guidance:

Finally, consulting with a wealth coach can provide assistance in navigating the bandwagon effect with objective insights and expertise.

This way, investors can make decisions that are not swayed by the emotional pull of market trends, but by the economic pull.