Crypto Investing
8 Feb 2022

Beating the Herd Instinct: Some Tips and Tricks for Successful Investing

Deepan Datta

Whether it is the crypto market or the stock market, winning requires you to overcome the herd instinct. Not being able to do so is the primary reason why most investors fail to make money in the market or make a timely exit from their losing investments.

Herd instinct, also referred to as mob mentality, is the tendency of people to behave or act in the same way as other people in the group or market. Herd mentality is often caused by fear and greed factors in the market, the two emotions that constantly battle it out to assume dominance in the market. Fear creates panic, leading to greater supply; whereas greed results in exuberance, giving rise to demand in the market.

You need to learn to ignore the market noise and keep your emotions in check to stay focused on your long-term investment goals. It helps build your distinct investor identity, crucial in long-term investing.

Key takeaways

  • The herd instinct is the tendency to act in the same way as other people in the market.
  • It leads to panic buying (caused by fear) or very high demand (caused by greed), both of which are not productive.
  • It helps to do your own research, find the right investors to follow, keep track of market trends, diversify your investment, and not check your portfolio too often.

Five Strategies to Beat the Herd Instinct

The problem is that the herd instinct is hardwired in our brains. Watching our investments go down creates anxiety and fear in our minds, leading to panic selling. Similarly, when the crypto assets we don’t own keep going up, the greed factor starts to drive us and we may feel inclined to buy them at absurd valuations thinking that its upward trajectory will continue.

We are all slaves of fear and greed, but these emotions are the investor’s worst enemy. It is, therefore, useful to keep them in check, and we are here to help you do so. We recommend the following five investment strategies, which can help you develop a distinct investor identity for yourself, instead of falling prey to the herd instinct.

strategy to invest successfully in long term

DYOR: Understand why it is happening

Before jumping the gun, understand why the market is going down and the factors responsible for it. Is it due to a change in fundamentals or a normal market cycle?

Doing Your Own Research (DYOR) is the first step towards making a conscious decision and forming an opinion about the market movement. Take time to make decisions, question your assumptions, and understand the effect(s) of your decision.

You will be less tempted to join the herd, driven by the fear and greed factors, but you must remain focused on your long-term investing goals. 

Follow successful investors

It’s a well-known fact that our social circle impacts our thinking ability and behavior. Whom we choose to follow defines our thought patterns, and as a result our proneness to succumbing to the herd instinct.

Following investors who are successful in the investing sphere and understanding their investing style helps a lot in the investment journey. The market views of successful investors are often formed by their experience of multiple market cycles over a long period of time, and if they are any good then from the lessons they learnt their mistakes. Identifying and taking the advice of such investors will help you become a better investor yourself, and you will be able to outperform your peers in the long term.

As Robin Sharma says, “Associate only with positive, focused people who you can learn from and who will not drain your valuable energy with uninspiring attitudes.”

Keep track of past market trends

In the long term, the market is a slave of fundamentals. Whatever the short-term trend in the market may be, assets with strong fundamentals become the wealth creators for investors in the long term. By looking at past market trends, you will find similar trends (to gain insights from) and rewarding, fundamentally strong investment assets.

Bitcoin Price Graph
Dogecoin Price Chart

A comparison of returns of a fundamentally strong crypto asset- Bitcoin, and a memecoin- Dogecoin.

Diversify your investment

Diversifying your investment portfolio helps spread the risks and maximize returns over the long term. When you don’t put all your eggs in one basket, each investment performs differently during market fluctuations and smoothens the return, which is important.

Other benefits of diversification include:

  • Making your portfolio more shock-proof,
  • Better managing market cycles,
  • Improving risk-adjusted returns, and
  • Leveraging growth in other crypto assets.

Refrain from checking your investment frequently

It’s important to keep track of your investment portfolio, but checking it too frequently will not help you either. In fact, by constantly checking your portfolio status, the chances of becoming sensitive to losses and gains are higher, which in turn kicks in the emotions of fear and greed. And it may lead you to make poor and rash decisions.

This phenomenon is also known as “myopic loss aversion”.


Maintaining your emotional composure in the market is very important. You need to start thinking of market volatility as your friend rather than your enemy. After all, market crashes and corrections help eliminate the weak links and bring stability and resilience to the market.

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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.


Deepan Datta

Content Writer

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