Beware Bandwagon Bias – What Will the Herd Favor in 2024?

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As investors cheer on the ”magnificent seven,” some football fans are forging new allegiances in hopes of rooting for the coming Super Bowl champion. The task isn’t easy. Recent favorites like the Bills and Bengals are fighting to make the playoffs. Indeed, a few fans of those teams will jump on the Dolphins or Lions bandwagon. Others may stick with the dependable Eagles, Chiefs, and Forty Niners.

Stock market investors and football fans are not that different. As 2023 ends, professional and amateur investors are thinking about what stock or investment theme bandwagon to jump on for the coming year.

This year, the magnificent seven stocks are the odds-on favorites to win the stock market Super Bowl. While hats off to those profiting from them, we must look ahead. To do so, we must appreciate the bandwagon bias harbored in our mindsets and not let it cloud our vision of the future.

Bandwagon bias of 2023

Bandwagon bias is a psychological phenomenon that happens when people do something because others are doing it already. Often called “following the herd” in market parlance, the bandwagon bias forces many investors into decisions they ultimately regret.