Follow the Hot Stocks

Robert Cialdini tells us all about the human condition known as the “social spoof” in his book Influence: The Psychology of Persuasion. Human have evolved far enough that we should know better than to run with the herd or blindly follow like little lemmings, but the instinct is to find safety in the numbers.

There are those that might think that we’ve outgrown such an instinct, that we are far removed from having the mentality of sheep, that such things are merely the stuff of fairy tales; but it is something that humans have been doing for a very long time, case in point the dot com boom. There were millions that were fearful of standing out and being different; the result was a fired up mania fueled by their fears. There are many facets of life where conformity is the key to success, but following the stock market is not one of them. Warren Buffet put it well when he said that if you want cheery consensus in the stock market you’ll pay a high price for it.

Beat yourself up over lost opportunities

Investing is an imperfect activity and there are bound to be mistakes. If you can see no mistakes then you’re probably doing it wrong. Sometimes when you are right you are absolutely wrong. The stock market is a contradiction sometimes.

In mid 1999 the tech stocks were overvalued, that’s absolutely correct to say. For the six month period thereafter the speculators played a huge role in sky-rocketing the prices and that sure did not feel correct. This is a fact of life; someone will always be getting rich just a bit faster than you. But, look at it this way; they can quite possibly become poor just as fast if they adopt the same approach.

If you have taken the conservative approach by not investing and then you see that the stock has gone up anyway, there’s no use crying over milk you never bought. There are numerous opportunities just waiting for you in the market, why waste your time an effort worrying about the ‘could have been’? If you want to blow your capital, by all means go for it.

If you want some tips regarding investing; what to do and what not to do in the stock market – then take a look at this video about investing.

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