Tuesday, December 4, 2012

How to Get Rich - Avoid the Herd Mentality

Do you feel comfortable in a crowd ?

Do you feel safe from danger if you stay with the masses ?

When it comes to investing, you must learn to stand out !

The Herd Effect

The herd effect is basically what happens when most investors go with the flow so to speak. They pattern their buy and sell decisions based on what is popular with all of the analysts and financial planners.

The problem with following this advise blindly is that the average investor has absolutely no idea why they are buying or selling at any particular time. Even scarier, some don't even have a clue what they are investing in.

They are following the crowd because it seems like a safe way to go. But is it really as safe as they think ?
My answer is no, it is not as safe as they think. How can it possibly be safe if you don't understand what you are investing in and why ?

Learn Before you Leap

Would it not make sense for you to learn as much about an investment before you invest your hard earned money ? Of course it would. That is only common sense.

The reason why most don't learn first is summed up in one word. Lazy !  They would rather spend their time watching tv, shopping or doing whatever else they enjoy instead of learning how to get rich. This is why there will always be the herd effect. Most people will not take the time to learn.

In addition to learning all you can about your investments, you also must learn when the best times are for you to buy and sell your investments.  I described this in my previous posting entitled "How to Get Rich - Understand Cycles" Check it out now if you haven't already.

Walk on the Backs of the Herd

By learning as much as you can about an investment and learning the best times to buy and sell that investment, you will in effect be walking on the backs of the herd. You will be rising above and setting yourself apart from the masses. You will be buying good investments before the herd does and you will be selling before the herd realizes things are going south.

I have said this many times before, but I'll say it again. Knowledge is Power ! The more knowledge you can gain the more power you will have to control your own future.

Don't become a part of the herd. Learn all you can and rise above the crowd. The rewards will be sure to follow.

As always, I welcome your comments and suggestions for future topics.

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