How a Flock of Birds Can be Similar to a Group of Investors
March 16, 2024
The instant changing pattern of a flock of birds can resemble the behaviour of investors, writes Peter Watson.
Have you ever noticed a flock of birds suddenly change course and amazingly all the birds follow the same flight path? As if they were the equivalent to Olympic athletes who had trained for years.
There is a scientific reason why birds fly this way. It has to do with their brains.
So, how can the comparison of how birds fly relate to how investors invest? The answer is simple: nothing and everything.
The key to appreciating how a flock of birds navigate and how a group of investors react to stock market volatility is not to try and understand why it happens, just appreciate that it does.
A good example of investors quickly changing their investment flight path was in early 2020 when COVID-19 invaded North America. Stock market volatility was extreme. The value of stock prices plunged and then miraculously and suddenly without warning skyrocketed.
All losses were quickly recovered, and stock markets went on to break records for appreciation when stock prices soared to new highs.
Investors as a group, like a flock of birds, suddenly changed direction. One-minute aggressive selling, the next minute aggressive buying.
The flock of birds will reach its ultimate destination. Its volatile flightpath is normal. After sudden change in directions the birds don’t decide to land and stop flying. They continue to fly and reach their destination.
Watson Securities (www.watsoninvestments.com) is a trade name of Aligned Capital Partners Inc. (ACPI). ACPI is regulated by the Investment Industry Regulatory Organization of Canada (www.iiroc.ca) and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Watson Securities is registered to advise in (securities and/or mutual funds) to clients residing in Ontario. This publication is for informational purposes only and shall not be construed to constitute any form of investment advice. The views expressed are those of the author and may not necessarily be those of ACPI. Opinions expressed are as of the date of this publication and are subject to change without notice and information has been compiled from sources believed to be reliable. This publication has been prepared for general circulation and without regard to the individual financial circumstances and objectives of persons who receive it. You should not act or rely on the information without seeking the advice of the appropriate professional.
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