This blog post by Carl Richards highlights the dangers of “groupthink” as it relates to investing. Independent-minded investors that focus on facts and weigh those facts properly in context to long-term horizons are rare these days. Too many investors are looking over their shoulder to see what everyone else is doing, drawing conclusions from third party opinions versus facts, judging performance in relative terms versus absolute terms, and justifying an investment simply due to its recent performance while simultaneously ignoring risk. It’s sometimes hard to absolve oneself from the noise and “groupthink”, but it’s a prerequisite if investors are to achieve long-term success. As Warren Buffett said: “The market is there to serve you, not to instruct you.”
C&J Wealth Advisors
Article Credits: This article originally appeared at the New York Times | by: Carl Richards | June 16, 2014.
The Drawbacks to Investing with the Group
In February 2012, a group of experienced skiers headed into the backcountry near the Stevens Pass resort in Washington State to look for untracked powder. It was a beautiful day, and everyone expected to have a great time skiing the popular Tunnel Creek section.
Minutes after the first skiers began heading down the hill, the snow cracked, setting off an avalanche. Several skiers were caught in the wall of snow, and after it came to a stop, rescuers discovered that three had been killed.
In an article that one of the surviving skiers, Megan Michelson, wrote for Outside magazine, she noted that “all of the warning signs had been there, glaring and obvious: heaps of new snow, terrain that would funnel a slide into a gully, a large and confident group with a herd mentality, and a forecast that warned of dangerous avalanche conditions.”
So what happened?