The secret of herd mentality among investors was revealed in Liar's Poker by Michael Lewis in 1989. Though the book was a No. 1 Best Seller, this small piece did not sink in. Perhaps, because it is a small paragraph hidden deep in the 249 page book. The book was written shortly after the 1987 Market Crash. The lesson doesn't seem have have sunk in yet.
Here is that truism again ...
The word stockbrokers use for this approach is contrarian. Everyone wants to be one, but for the sad reason that most investors are scared of looking foolish. Investors do not fear losing money as much as they fear solitude, by which I mean taking risks that others avoid. When they are caught losing money alone, they have no excuse for their mistake, and most investors, like most people need excuses. They are, strangely enough, happy to stand on the edge of a precipice as long as they are joined by a few thousand others.
Michael should know what he is talking about. He was there.
So the next time you see a gold rush, either be the first to get in and get out. Or wait for the market to fall on its face.