don t be a lemming an uninformed investor who exhibits herd mentality and invests without doing their own research often loses money 4
herding and investment bubblesan investment bubble occurs when exuberant market behavior drives a rapid escalation in the price of an asset above and beyond its intrinsic value the bubble continues to inflate until the asset price reaches a level beyond fundamental and economical rationality 5at this stage in a bubble s existence further increases in the cost of the asset often are contingent purely on investors continuing to buy in at the highest price when investors are no longer willing to buy at that price level the bubble begins to collapse in speculative markets the burst can incite far reaching corollary effects 52some bubbles occur organically driven by investors who are overcome with optimism about a security s price increase and a fear of being left behind as others realize significant gains speculators are drawn to invest and thus cause the security price and trading volume to climb even higher the irrational exuberance over dotcom stocks in the late 1990s was driven by cheap money easy capital market overconfidence and over speculation it did not matter to investors that many dotcoms were generating no revenue much less any profits the herding instincts of investors made them anxious to pursue the next initial public offering ipo while completely overlooking the traditional fundamentals of investing just as the market peaked investment capital began to dry up which led to the bursting of the bubble and steep investment losses 65