Don’t Trust the Crowd

The herd, it seems, alters our perception of reality.

Back when I was a newspaper editor in Rochester, N.Y., an investment club invited me to speak about small-company stocks, a subject I occasionally wrote about. Before the session, I talked with club members to learn more about how they picked stocks. They explained that they focused on a single strategy involving small companies and earnings momentum. So fixated were they on this one approach that when I asked whether they employed other strategies as well, it was as if I had asked members of the Southern Baptist Convention who else they worshiped besides Jesus.

At one point during the session, I tried to point out that small growth companies represent just a thin slice of the market -- and a risky one at that -- and recommended that the group consider diversifying. I might as well have told the aforementioned Baptists they should also consider that Buddha fellow.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%
https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription


Why am I seeing this? Find out more here

Bob Frick
Senior Editor, Kiplinger's Personal Finance