Investing: Don’t Follow the Herd Right Off a Cliff

Many people are a little unsure about things when it comes to investing. That’s understandable, because unless you grew up surrounded by investment talk, chances are you haven’t heard a whole lot of the “language” of investing. And it does seem to have a language all its own…

Plus, of course, there’s the fear of losing money if you screw up, and the fear of losing out on opportunity by missing something good.

It’s hard to get good, specific advice about the kinds of investments you should make. I know I’m sure not going to give you any — both because I don’t have any advice about specific investments, and because I’m not qualified or licensed to do so.

But I will say one thing.

Remember what it was like back at the peak of the housing market? Back when it seemed like everyone you knew was getting into their first house, moving up in house, or buying houses as investments?

Everyone was talking about not missing out, or getting in before they’d never be able to afford a house ever again.

That’s the time when it can pay to not follow the herd — because sooner or later the herd is likely to go right off a cliff. Sometimes it’s good to make some contrarian investments — to sit back and do the opposite of everyone else because you believe a certain investment is either undervalued or overvalued.

Only you can evaluate when those times are and what’s best for your situation, but I base some of my investing decisions on the level of hysteria around me. When I hear myself saying, “That’s crazy!” or random people in the grocery store talking about what they’ve bought, I figure it’s time to do the opposite of what most people are doing. I’m usually a little early on that kind of stuff, but that’s ok with me.

What about you? Do you follow a contrarian strategy? Have you gone against the grain with something when it comes to investing before or have you tried something like ethical investing? How did it work out for you, if so?

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2 comments

  • I remember getting out of the market completely after the dot com bust. I don’t think I had anything in my account.

    Then I had to work on a MacBook (courtesy my workplace). I used it and felt that was a solid product. So I invested in Apple. Remember this was waay before Apple’s enormous success. And I had heard of iPod, never used one. Not many were even covering apple.

    I had done no research (all my well researched stocks tanked in the market crash!). Plainly went with my gut. All I knew about Apple was the MacBook I used at work.

    The rest is history! This is one of the very few stocks I bought blindly and that was also my re-entry into the market.