Page 158 - A Canuck's Guide to Financial Literacy 2020

158

▪ Herd Mentality

Also known as the mob mentality which encourages people to act or adopt the same
similar behaviors as people around them. When it comes to investing, always be
aware of your herd instinct. Make sure you do your own analysis when it comes to
investments. Herd mentalities have been known to cause substantial market rallies
and extensive sell offs, often on a lack of fundamental support to justify either.

When making investment decisions, keep in mind Behavioral Finance Theory and keep
your emotions in check. We recommend that when faced with decisions regarding your
portfolio to:

▪ Go with your gut.
▪ Embrace logical decision-making process.

As Warren Buffet put it, “Investing success doesn’t correlate with IQ after you’re above a
score of 25. Once you have ordinary intelligence, then what you need is the temperament to
control urges that get others into trouble.