Lemming

AAA

DEFINITION of 'Lemming'

The act of an investor following the crowd into an investment, without doing research themselves; this usually results in losses. These investors are emotional and easily swayed by the current ongoings of how well or bad the market is doing. This term is considered a "herd" mentality that can increase the chance of losing invested funds, because investors either leave the market too early or get into it too late, when prices are already too high to make a profit.

INVESTOPEDIA EXPLAINS 'Lemming'

In the animal kingdom, a lemming is a rodent known for periodic mass migrations that occasionally end in drowning.


To contradict the "herd" mentality, many proactive investors react in an opposite fashion than what the majority of investors are doing. For example, if investors are in a buying frenzy, anti-"herd" investors will sell and when the crowd sells, these investors will go against the lemmings by buying stocks, instead.

RELATED TERMS
  1. Ostrich

    A colloquial term that refers to the tendency of certain investors ...
  2. Skittish Market

    An investment climate marked by skeptical investor behavior. ...
  3. Bear

    An investor who believes that a particular security or market ...
  4. Herd Instinct

    A mentality characterized by a lack of individual decision-making ...
  5. Bull

    An investor who thinks the market, a specific security or an ...
  6. Investment Strategy

    An investor's plan of attack to guide their investment decisions ...
Related Articles
  1. Riding The Momentum Investing Wave
    Trading Strategies

    Riding The Momentum Investing Wave

  2. 3 Ways Price Momentum Can Burn Your ...
    Trading Strategies

    3 Ways Price Momentum Can Burn Your ...

  3. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

  4. Market Problems? Blame Investors
    Options & Futures

    Market Problems? Blame Investors

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center