In our office we have recently been talking about the “herd mentality”. More specifically we have discussed that our firm seems to get most of its new clients when things are fantastic, but when the market is low people refuse to invest. This certainly defies the buy low, sell high approach everyone seems to preach.
In a more recent discussion Matthew and I came to the conclusion that it truly takes a leader to invest when sentiment is so pessimistic, when the stock market is a bit difficult and everyone is sitting on the sidelines. By definition, to lead is to go at the head of or in advance of… proceed first in.
I feel that it really does take a leader to step up to the plate here. Most people follow the herd mentality and only do things when they are apparent. In the world of investing, if you wait until something is apparent, you are usually too late. If you do not take risks before the market accelerates you will not make the big bucks. Instead you will be faced with mediocre results or at worst, come in at the top only to be subjected to the downside.
In our discussion we talked about how leaders really are few and far between. This is why we have so few new clients during market bottoms and so many new clients at market tops. It is hard to take that leap of faith especially during difficult times but occasionally some people do step up. Of course there are risks and nothing is guaranteed but we have noticed from experience that the people who invest during difficult times typically are the ones who seem to prosper.
Posted on
Fri, August 14, 2009
by Mark Simmons