Sheep

DEFINITION of 'Sheep'

An investor who lacks a focused trading strategy and trades on emotion and the suggestions of others, including friends, family and financial gurus. This type of investor often makes rash investments without first determining whether these decisions are financially viable. The behavior of sheep contrasts with that of bulls and bears, who have focused views about the market.

BREAKING DOWN 'Sheep'

Like a sheep, this type of investor is a follower, relying on a shepherd for guidance. These shepherds can come in the form of financial pundits or the latest trend or market story.

Sheep-like investors are often the last to get in on a major market move, such as the tech boom of the late '90s, because they base their investments on what is being talked about the most. Many experts believe that sheep-like investors are the most likely to sustain investment losses because they have no clear investment strategy.

RELATED TERMS
  1. Emotional Neutrality

    The concept of removing greed, fear and other human emotions ...
  2. Joint Supply

    An economic term referring to a product or process that can yield ...
  3. Wool Growers Floater

    A type of insurance policy that provides coverage for sheep owners ...
  4. Tragedy Of The Commons

    An economic problem in which every individual tries to reap the ...
  5. Bellwether

    An event or indicator that shows the possible presence of a trend. ...
  6. Behavioral Funds

    Definition of behavioral funds.
Related Articles
  1. Financial Advisors

    How to Separate Emotions from Investing Decisions

    With stock market volatility, financial advisors are finding they're doing more hand-holding to help clients navigate turmoil.
  2. Investing Basics

    Removing The Barriers To Successful Investing

    Learn how to stop using emotion and bad habits to make your stock picks.
  3. Active Trading

    Value Investing: Common Alternatives To Value Investing

    There are dramatic differences in the ways different types of investors make their investment decisions. In this section, we'll look at some of the most common investment philosophies and ...
  4. Investing Basics

    Why You Shouldn't Manage Your Friends' Money

    Your pals may like your returns, but it isn't wise for you to manage their money.
  5. Credit & Loans

    Credit Crisis: Lessons Learned

    By Brian PerryEven at the height of a great bull market, successfully navigating the financial markets is a challenge for investors. This challenge is magnified exponentially during market crises. ...
  6. Professionals

    Investment Strategies

    Investment Strategies
  7. Investing

    7 Ways Your Emotions Skew Your Business Decisions

    Important decisions such as making a key investment, increasing production or expanding into new lines are all clouded by human emotion. Can you stay cool under pressure?
  8. Options & Futures

    Investors: Rely On Your Gut

    Find out how your personality and natural instincts can direct your investment choices.
  9. Financial Advisors

    Preparing Your Clients for the Next Bear Market

    It has been almost six years since the last bear market, so it might be time for advisors to start preparing their clients for the inevitable downturn.
  10. Investing Basics

    5 Reasons the Rich Are Better Investors than the Average Joe

    Find out five investment secrets of rich investors that make them better at investing than the average Joe. It's nothing you couldn't do yourself.
RELATED FAQS
  1. What are common investing mistakes in bear markets?

    Learn why investing in a tumultuous market can be challenging even for the most experienced investors. Avoiding these common ... Read Answer >>
  2. How can I tell if I'm an emotional investor?

    Successful investors possess the important trait of emotional stability, which means that they base their investment decisions ... Read Answer >>
  3. How should young people invest in a bear market?

    Learn strategies young investors can implement during a bear market that present the greatest opportunity for long-term investment ... Read Answer >>
  4. Where do investors tend to put their money in a bear market?

    A bearish market is traditionally defined as a period of negative returns in the broader market to the magnitude of between ... Read Answer >>
  5. What are some of the limitations of only looking at the rate of return for an investment?

    Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >>
  6. What does it mean to be absolutely risk averse?

    Learn about three kinds of investors: those comfortable with significant risk, those comfortable with limited risk and those ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center