Given the recent price action in the stock and bond markets (i.e. down), it’s important to remember that the title of this article can be relevant and important to remember when investing!
(Note: Historically, even with violent selloffs or bear markets, the stock market has always made its way back to make new highs. The question, were a bear market to occur, is the size of the selloff and timeframe the bear market would last. The historical norm for the 10-year Treasury is in the range of 5.0%. Today it sits at 2.85%.)
A recent example is the craze over Bitcoin that drove some people to borrow money, often at painfully high interest rates, to play in this market. Why? Because every time Bitcoin sold-off or dipped in price, it would soon roar back to make even higher highs.
This cryptocurrency investing wasn’t based on any specific or rationale thought process based in fundamental analysis of Bitcoin’s intrinsic value. Rather, it was primarily based on greed and recent past history of exorbitant potential gains through short-term observation.
Flashback, January 2016: ‘Historic Look At Following The Herd Or Worse, The ‘Experts’, When Investing!‘
And while this small dip in the stock market relative to the massive run-up we have witnessed may very well be an opportunity to buy, remember also the phrase that ‘their’s no such thing, as a sure thing’!
Whether it’s stocks, bonds, real estate or politics, who do you take your decision-making cues from!
Is your decision-making based on what everyone around you is doing or worse, from what the so-called ‘experts’ are telling you to do?
This type of strategy can often be a mistake because the truth is that both individuals and those who advise individuals are for the most part trend followers as opposed to independent thinkers!
Following The Herd, A Look Back At History!
Here are a few examples of trend following from the past that didn’t necessarily workout that well…
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