We’re only weeks into 2025, and it’s already been one filled with market volatility and uncertainty. At times like this, being part of a crowd might feel comforting, but following the investment decisions of others could lead to choices that aren’t right for you. 

Political and economic uncertainty means investors may already have experienced the value of their investments falling this year. In fact, towards the end of January, you might have been affected by the value of US technology stocks falling sharply. 

The sudden emergence of Chinese AI app DeepSeek, which rivals US AI technology at a fraction of the cost, led to some investors questioning whether the US’s dominance in the sector would continue. 

According to the BBC, following the release, Nvidia, which makes chips for AI, saw share prices fall 17% on 27 January – the biggest single-day loss in US market history. The next day, the share price began to recover but remained significantly below where it had been the previous week. 

It wasn’t only Nvidia that was affected either, many other US technology businesses experienced a fall in share prices. Indeed, the Nasdaq – a technology-focused US index – was down 3.5% when markets opened on 27 January. 

With other investors seemingly selling off their US technology stocks, you might have been tempted to follow the crowd and do the same.

Market volatility can trigger herd instinct among investors 

Herd instinct is a type of financial bias where people join groups to follow the actions of other people. When investing, it might mean you make similar investments to others or that you sell your investments when share prices fall. In fact, herd instinct at a large scale could lead to market crashes or create asset bubbles. 

It’s easy to see why this happens. Being part of a crowd can offer a sense of comfort, especially during periods of uncertainty. In contrast, standing out from the crowd could mean you feel vulnerable or that you’re making a mistake by going against the grain. 

So, following the crowd may feel like the sensible option. After all, if everyone else is doing it, it must be the right decision.

Yet, it’s not as straightforward as that. In fact, herd mentality could harm your long-term plans and wealth. 

When following the lead of others, you might assume they’ve already carried out research, so you skip analysing the decision. The other investors could also be acting based on herd instinct or making a decision that’s right for them, but that doesn’t automatically mean it’s the right option for you. 

3 useful strategies that could help you focus on your own path

While it can be difficult to not compare your investment decisions with those of others, remember, with different goals and circumstances a great investment for one investor isn’t right for another.  

So, here are three useful strategies that could help you focus on following your own investment path. 

1. Develop a clear investment plan

One of the key steps to reducing the effect of herd mentality on your decisions is to have a developed investment plan. By outlining your objectives, you’re in a better position to understand the types of opportunities that are right for you.

If you have confidence in your investment strategy, you’re also less likely to be tempted to make changes. For example, if you know your investments are on track to provide “enough” to reach your long-term goals, taking additional risk for a chance to secure higher returns might not be as appealing. 

As a financial planner, we can help you create an investment plan that provides you with a clear direction. 

2. Diversify your investments in a way that reflects your plan

One of the challenges of investing is keeping emotions in check. You’re more likely to follow the crowd when the market or your investments face a sharp fall or rise. It might mean you feel uncertain about the investments you’ve chosen, so you start to look at what others are doing.

Diversifying won’t shield you from all market movements, but it could mean you’re less exposed to volatility. By investing in different asset classes, sectors, and geographical areas, when one part of your portfolio experiences a dip, it could be balanced by gains in another. As a result, it may mean the value of your investments is less likely to experience large fluctuations and limit knee-jerk decisions. 

3. Be aware of your investment risk profile 

All investments involve some risk. However, the level of risk can vary significantly.

So, understanding risk could mean you’re able to confidently pass by opportunities that you know involve more risk than is appropriate for you even if it seems like everyone else is investing in it. 

Contact us to talk about your tailored investment strategy

If you’d like to talk about how to invest in a way that aligns with your goals and circumstances, please get in touch. We can work with you to create a tailored investment strategy that may give you confidence in the steps you’re taking. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.