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.


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.

  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. Herd Instinct

    A mentality characterized by a lack of individual decision-making ...
  4. Bear

    An investor who believes that a particular security or market ...
  5. Investment Strategy

    An investor's plan of attack to guide their investment decisions ...
  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. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  8. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  9. Investing News

    6 Signs You Are Addicted To Investing

    An addiction to trading can ruin your life and relationships. Not to mention the monetary costs. There are telltale signs that you've gone too far.
  10. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  1. How do mutual funds split?

    Mutual funds split in the same way that individual stocks split, but less often. Like a stock split, mutual fund splits do ... Read Full Answer >>
  2. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>
  3. Is it better practice to use a stop order or a limit order?

    Both stop orders and limit orders have their advantages and disadvantages; traders need to decide between the two based on ... Read Full Answer >>
  4. What is the difference between a buy limit and a sell stop order?

    A buy limit order is a specific type of buy order used to enter a market, while a sell-stop order is a sell order that can ... Read Full Answer >>
  5. What is the difference between a short squeeze and a long squeeze?

    A short squeeze and a long squeeze are situations that can force traders and investors out of their positions. A short squeeze ... Read Full Answer >>
  6. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!