Why Do We Invest Like Everyone Else?

Copycat investing is a common phenomenon, even among institutional investors. Following someone else’s investment strategy may lead to the perception of reduced risk, but it actually increases risk. Those who mimic others can be off-kilter in their allocation timing. Such maneuvers may also cause distorted valuation measures or—in the extreme—an asset bubble. Yet otherwise rational professionals can be irrational investors when it comes to a decision-making process. We routinely hear questions in our discussions about who else is investing in a given deal. Our retort is a mantra: “Better to act independently, than to be swayed by peers.”

Learn more at the The Atlantic.

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