MobsJanuary 13, 2021 -
Categorized in: IAG News
I have seen enough mob mentality at work over the last twelve months to last my lifetime. From Portland to Kenosha to Washington, D.C., destructive physical mobs have left a path of devastation and chaos.
It is impossible as individuals to reflect on the actions of a mob without asking ourselves, “What were they thinking?”
The short answer is many of them were likely not thinking.
While most of us hold moral beliefs that would prevent us from ever destroying other people’s lives or property, we also have a natural tendency to go along with a crowd.
There is something exciting about being part of large group of those similar to us. Advertisers frequently use this psychology by showing members of your “mob” using their product or service. Companies use this strategy to build brand loyalty. Political parties use it, too. Being part of a “mob” is much more comfortable than being singled out and standing alone.
Once you are part of a mob, your mob can influence you to surrender your own thoughts and beliefs just to remain part of the mob. When forced to choose between continuing to be part of your “mob” or slightly violating your personal beliefs, most people’s default reaction is to start trusting the mob’s thoughts instead of their own. After all, how could so many people suddenly be wrong when all along they have been so right?
Soon individual decision-making may be outsourced to the crowd, and it only takes a few people with bad ideas to take your mob in the wrong direction.
This mob mentality also occurs in the financial markets.
In February and March last year we witnessed an historical decline in stock prices around the globe in a very short period of time. What started as a seed of doubt turned into unrelenting fear for over a month. The mob was scared and panic selling.
In November and December last year we experienced a tremendous rise in stock prices. What started as a seed of confidence grew into unrelenting greed. The mob was scared of missing out.
The best strategy for avoiding mob mentality is to always retain your individual decision-making. Never outsource your family’s financial future to the crowd.
Instead, find a trusted realist to help you identify and avoid the many pitfalls to which the crowd may lead you. Share your questions, ideas, and dreams with your trusted realist, and permit them to thoughtfully evaluate your best individual path forward.
We are thankful for everyone who has selected our advisors as their trusted realist, and look forward to serving those who prefer to opt out of the mob.
Quote of the week: Warren Buffet: “Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.”
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Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
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