Key points are as follows…

  • For periods of time it may pay to back the crowd in investing, eg, when a bull or bear market is developing.
  • But at extremes the crowd is invariably wrong. Eventually everyone who wants to buy will have done so and the only way is down (or vice versa during crowd panics).
  • Investors are best off taking a contrarian approach – buying into assets that are unloved by the crowd and undervalued and selling assets that have become overloved by the crowd and overvalued.