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. Sheep

    An investor who lacks a focused trading strategy and trades on ...
  4. Investment Strategy

    An investor's plan of attack to guide their investment decisions ...
  5. Pig

    An investor who is often seen as greedy, having forgotten his ...
  6. Bull

    An investor who thinks the market, a specific security or an ...
Related Articles
  1. Trading Strategies

    Riding The Momentum Investing Wave

    Buy high and sell higher. Find out if you could surf these risky waters.
  2. Trading Strategies

    3 Ways Price Momentum Can Burn Your Portfolio

    Momentum traders are always trying to ride the herd. In these three situations, however, they may end up getting trampled.
  3. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  4. Options & Futures

    Market Problems? Blame Investors

    Investors are only human, and their irrational behavior can often move the market.
  5. Trading Systems & Software

    Trading Systems: Run With The Herd Or Be A Lone Wolf?

    Find out if taking the path less traveled will work in your favor - or against it.
  6. Active Trading Fundamentals

    Leading Indicators Of Behavioral Finance

    Discover how put-call ratios and moving averages can be used to analyze investor behavior.
  7. Chart Advisor

    Why Now is the Time for Food and Beverage Stocks

    As volatility rears its ugly head, it's natural to investigate stable sectors such as food and beverages. Here's an appropriately-named ETF to consider.
  8. Chart Advisor

    4 Big Stock Gainers: Hold or Sell?

    These four stocks saw big moves higher on March 17. Is it time to take profits or hold out for more. Here's what the charts say.
  9. Charts & Patterns

    Why These Could Be 2015's 10-Best Pharma Stocks

    The pharmaceutical stocks covered here have significant potential going forward. Here's why.
  10. Charts & Patterns

    Are These the 10 Best Internet Stocks of 2015?

    These internet companies vary in size, but they all offer future potential.

You May Also Like

Hot Definitions
  1. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  2. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  5. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
  6. Currency Carry Trade

    A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase ...
Trading Center