Herd Mentality
Herd mentality is following the crowd rather than independent analysis, contributing to bubbles and crashes.
Exam Tip
Herd mentality drives bubbles and crashes. FOMO and social proof are key drivers. Contrarian strategies often outperform at extremes.
What is Herd Mentality?
Following the crowd instead of independent analysis.
Causes
- FOMO (Fear of Missing Out)
- Social proof
- Safety in numbers
- Career risk
Market Cycle Herding
- Late bull market: FOMO drives inflows
- Panic phase: Mass selling, capitulation
- Market bottom: Maximum pessimism
Contrarian Advantage
Research shows contrarian strategies often outperform during extremes.
Study This Term In
Third-party resources · We may earn a commission from purchases.
Secrets of the CFP Exam Study Guide: CFP® Test Review for the Certified Financial Planner Exam (Mometrix Secrets Study Guides)
By CFP® Exam Secrets Test Prep Team
$54.99 · 
Take courses on Udemy
Exam information on Achievable
Flashcards on Mometrix
Third-party resources · We may earn a commission from purchases.
Series 66 Study Guide 2025–2026: 10 Full-Length Practice Tests, 1600+ Realistic Questions, Detailed Answer Explanations, and Proven Strategies to Pass the Uniform Combined State Law Exam
By Bean, Charles K.
$29.99 ·
Practice exams on ExamEdgeFlashcards on MometrixPrep course on AchievableRelated Terms
Overconfidence Bias
Overconfidence bias is overestimating one's knowledge, abilities, and forecast precision, leading to excessive trading and under-diversification.
Confirmation Bias
Confirmation bias is the tendency to seek, interpret, and remember information that confirms pre-existing beliefs while ignoring contradictory evidence.
Your AI study companion · 10 free interactions a day
Stay Updated
Get free exam tips and study guides delivered to your inbox.