Title: Market Problems? Blame Investors
Headings: Market Problems? Blame Investors
Market Problems? Blame Investors
Key Takeaways
Following the Crowd
We Can't Control Everything
Holding Out for a Rare Treat
Xenophobia
A Handy List
The Bottom Line

Content: Smart investors can see a selloff like this as a buying opportunity to go against herd mentality and pick up bargain stocks. Following the Crowd
Humans are prone to a herd mentality, conforming to the activities and direction of others. This is a common mistake in investing. Imagine you and a dozen other people are caught in a theater that's on fire. The room is filling with smoke and flames are licking the walls. The people best qualified to get you out safely, such as the building owner or an off-duty firefighter, shy away from taking the lead because they fear being wrong and they know the difficulties of leading a smoke-blinded group. Then the take-charge person steps up and everyone is happy to follow the leader. This person is not qualified to lead you out of the nearest 7-Eleven let alone get you out of an unfamiliar building on fire, so, sadly, you are more likely to end up as ash than find your way out. This tendency to panic and depend on the direction of others is exactly why problems arise in the stock market, except we are often following the crowd into the burning building rather than trying to get out. Here are two actions caused by herd mentality: