why is the bandwagon effect important to investors 
the bandwagon effect can lead investors to follow the crowd which may result in asset bubbles or crashes depending on if the crowd is buying or selling in either case people may invest for fear of missing out fomo rather than making individual evaluations of investments and doing due diligence buying or selling simply because everyone else seems to be doing it can lead to bad outcomes the bottom linethe bandwagon effect is a phenomenon in which people start doing something because everybody else seems to be doing it it can be caused by psychological social and economic factors people may want to be part of a group that seems likely to win be convinced something is correct because they ve heard it repeated so many times or simply be influenced by their friends or relatives the bandwagon effect was first identified in politics people often vote for the candidate who appears to have the most support because they want to be part of the majority regardless of their own political beliefs it can also impact consumer spending and investing decisions 