I was brought up on a farm, mainly arable but in the good old days there were also plenty of sheep. I would think I know as much as is healthy for anyone to know about sheep.
One thing I noticed from the many years of staring out my bedroom window at a field full of sheep is how they flock together. How they instinctively crowd together for protection, and for company. Now, I hope you are not of a nervous nature, because I have to tell you that occasionally the sheep were threatened by predators, normally foxes, sometimes dogs (and very occasionally crows, which would attack them by pecking their eyes out, so you see you don’t have to go on safari to see some of natures nastier side) and every now and then one would be killed. The one that died would inevitably be the one that stood out from the crowd, the one that was least integrated into the flock. The predator generally would not attack the sheep crowded together.
I often think of this when I read reports in the media of the sheep like behavior of investors or fund managers and often wonder at the way this is positioned in such disparaging terms. Why is acting like sheep so criticized? I think standing out from the crowd, swimming against the tide, being “a contrarian” is fantastically over rated.
If you think about it, sheep are fantastic creatures. They are relatively slow, not very good in a fight, can’t dig holes, can’t fly, can’t swim (well actually they can but not in the same sense that it helps them in the natural environment) and are certainly not cunning or clever. Their CVs are not high on the list of impressive animals. Any yet for all this they are fantastically resourceful, their survival rates in the wild are exceptionally high and their life expectancy higher than average if you ignore the slaughter-house. The point is being a sheep works. It is much better than being just about any other type of animal.
So, I say, leave sheep alone. All those nasty people who keep going on about sheep-like behavior to disparage anyone who fits in with the crowd or follows the herd, should have a good long hard think about what they are really saying. The fact sheep stick together, follow each other around, and generally mind their own business is an asset not a liability. And it is the same in the investment world: acting sheep-like is generally a good way of acting. Making decisions in a sheep-like way is generally a good way of making decisions. Sticking with the crowd is likely to prove more profitable than standing out from the crowd.
To understand this further than a much longer dissection of this train of thought is contained within my booklet “12 common misconceptions about investing” a free copy of which you can read or download across this site.
