Benjamin Graham
“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”
As humans, we care deeply about what others think about us and our actions. We are herd animals by nature. That instinct is very strong, and perfectly normal.
However, when it comes to investing, that instinct might do us a disservice and be bad for us. Markets tend to overreact, and sometimes, individual securities can get decoupled from their intrinsic value because of herd mentality. Remember the recent “Meme Stock” example, which benefitted few but hurt so many.
Your investing decisions should be based on your own thinking and reflections about the best data and information you can find. Not what others think or how the majority of the market participants act at any given point in time.
This great quote from Benjamin Graham reminds us to invest only in what we understand. “Data” and “Reasoning” are the key concepts. We must understand what we invest in so that we can stay committed through the inevitable ups and downs of the market.
In life, emotions are important. When it comes to investing however, emotions and the – very human – desire for peer acceptance can backfire on us. Benjamin Graham encourages us to do the right thing: gather facts and data, understand them, and then base our investment decisions only on that – not on what other people may think or do. This might be a more lonely road, but ultimately, I believe one that leads to more success.
Links to Further Reading:
Herd Instinct: Definition, Stock Market Examples & How to Avoid: https://www.investopedia.com/terms/h/herdinstinct.asp
Never Invest In Something You Don’t Understand: https://money.usnews.com/investing/articles/2017-05-11/never-invest-in-something-you-dont-understand
