We almost cannot live without the Internet now. If you are not too young, you must remember the dot-com bubble in 1995–2001. Over the period, investors were crazy about companies in the Internet business and were ready to buy these companies at any prices. On the other hand, companies could cause their stock prices to increase by simply adding an “e-” prefix to their name or a “.com” suffix, which one author called “prefix investing”. By the end of the 1990s, the NASDAQ hit a price-to-earnings (P/E) ratio of 200. Many companies disappeared afterwards and many crazy investors, or rather speculators, in this dot-com rush lose their money.
How could this kind of crazy thing happen repeatedly in history? It’s herd behaver at work.Continue reading “Human Weakness in Investment – Herd behaver”