You’re Not Paranoid. The Market Is Out to Get You

It has never been harder to be a disciplined and independent investor. In today’s incessantly twitchy, infinitely networked markets, the siren song of smartphones, social media and streaming video can tempt you to trade more and copy the crowd.

After all, it often makes sense—and just feels right—to join the herd.

You probably wouldn’t eat at an empty restaurant, purchase a product that has no positive online reviews or buy a house nobody else will bid on.

Own a soaring stock you can chat about online with thousands of other people who love it, and you’ll feel you belong to a pride of lions. Own a falling stock that nobody wants to touch, and you’ll feel like a skunk at a garden party.

Starting in 2020, swarms of investors coalesced on Reddit, Twitter and Discord to pool their buying power and drive up the prices of such stocks as AMC Entertainment Holdings, GameStop and Bed Bath & Beyond. A few leaders and early birds made huge profits.

Yet crowds aren’t always right, and their errors are contagious. What separates the wisdom from the madness of the crowd?