Herd Mentality on Silver: Six Tips on How to Avoid
Herd mentality describes how people are influenced by their peers to adopt certain behaviors, follow trends, and/or purchase items. Examples of the herd mentality include stock market trends, fashions in apparel, cars, taste in music, home décor, etc. – Wikipedia
^ Don’t be among the sheep. Meehhh…
If you have not heard about herd mentality, you may want to stop your world for a second and read up a bit on it. Chances are if you are making decisions based upon the actions of others, you may be among the sheep.
Investors with herd mentality are usually at the bottom of the food chain when it comes to investment. Because they rely mainly on grapevines, they usually buy during uptrend and sells during a downtrend.
Here are six tips on how to avoid being a sheep.
1) DYODD – Do your own due diligence.
Everybody is a guru of their own league. Without a solid understanding on the fundamental, you will be swing left and right by all these so-called investment gurus.
Some may predicts silver will dunked down to $25/oz and that would be the best time to buy. Another guy you barely known will say it is now or never! Dig out all your cash today and buy as much as possible today! Price will start shooting up tomorrow! Target $65/oz!
^ Mike Myers is the silver guru. He foresees silver will go uptrend forever.
You should start by understanding the primary fundamental of silver before diving into it. Having your own point of view is crucial. Bear in mind that sheep does not have the ability to think, they just follow.
Unlike gold, silver is a hybrid with two major usages. Almost all silver ever unearthed are channeled into industrial usages. Merely 5% of silver are used for store-of-value or monetary purposes. Silver is traded just like any commodity in COMEX and is subject to volatility. Unless you are able to tolerate the yo-yo like prices, you may want to consider alternative investment.
Do your own research sufficiently on the nature of silver.
DYODD and be your own guru.
2) Have solid and clear investment goals.
Set clear goals for your silver. You may want to set the amount of silver you would like to purchase on monthly basis. You may also want to set a target date or price for exiting. Buy 25 ounces of silver monthly, exit silver in 5 years time or sell 50% off when price hits USD125/oz are examples of simple plan that one can start with.
Goals like, I will be rich by investing in silver, or buy as much dragon lunar coins as possible now and laugh my way to the bank are goals that you should avoid. These are ambiguous goals. Goals should be as detailed and specific as possible.
Now that you have plans and goals, these are just the easy part. It is the discipline to carry out the plans that counts.
Sheep has two goals. Eat as much grass as possible and grow fat.
3) Consider Ounce-Cost-Averaging.
Emotion is the primary driving force in shaping herd mentality. It is the feeling of ego and greed during uptrend that causes sheep to fanatically buy more than what they should. It is the feeling of panic and fear during downtrend that causes sheep to squash themselves while rushing to sell more than what they should.
^ The classic call for sheep investors to buy and sell
Applying dollar cost averaging for your investment is recommended as it takes the emotion out from the equation. It pays to be discipline. You can consider applying Ounce-Cost-Averaging as it is more relevant for Precious Metals.
4) Read enough and go enjoy the sun.
In this era of electronic media, we are overcrowded with information. With just a few keyboard strokes over Google, you have the entire world of reading material in front of you. It is like having a night of Moet free flow party. Most likely, you will have a glass too many. How does a party like that usually ends?
^ Everything under the sun about Silver is here!
While reading news are great ways to keep yourself updated with all the recent hoo-haa, I suggest limiting reading to only a handful of your favorite resources. Having too much often contradicts or confuses one’s standing.
Cut off unnecessary information.
Too much reading means lesser time under the sun. The world does not revolve with just the Internet and Facebook. Go out and get your Vitamin D!
For myself, I read Mike Maloney, Jim Rogers and James Turk. I am also an avid fan of Tun Mahathir’s Chedet.cc.
5) Avoid discussing about your PM with Bankers.
“When you own gold you’re fighting every central bank in the world.” – Jim Rickards
If you are into PM investment – be it Gold or Silver, Bankers are your enemy.
Hola, it was them who created all these havoc in the first place! Not only that, chances are you maybe siphoned into buying unrelated financial products. Don’t forget, they are salesmen disguising under the title of financial consultants trying to sell you yet another “paper” product to earn commission.
To them, they are the holy shepherd and you are the soon to be sacrificed sheep.
6) Stop staring at the Silver chart on every breath.
^ Staring at chart all day long is for Wall Street, not Main Street.
Seriously, come on.
Don’t you have any better things to do? Even a day trader will need to have some time off the chart. Silver trades round the clock. How many shots of espresso will you need to stay awake?
Looking at charts all day long creates anxiety. Anxiety creates feeling of fear, worry, uneasiness, and dread. It is all the ingredients needed to create herding. Apply Ounce-Cost-Averaging. Buy your silver based on strict doses. Once it is done, switch off your computer and get some real life.
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