Is following the crowd a useful investment tool?

Chris Maule, CEO of UK Bond Network, explains why taking 'wisdom' from the crowds can prove to be a useful investment strategy

Crowd behaviour – or a herd mentality – describes how people are influenced by their peers to copy behaviour, follow trends, or mimic buying habits. While we must be conscious to avoid following the herd into overpriced stocks or overzealous action, crowd behaviour does have some benefits when it comes to investing. In fact, individuals can benefit from the collective wisdom of the crowd – especially when an individual is faced by uncertainty. This phenomenon was popularised by financial reporter James Surowiecki who wrote a much debated book, The Wisdom of Crowds: Why the Many are Sm...