Are You an Investment Loner, Follower, or Zombie?

Your mindset strongly affects the investment decisions you make; these categories each have their strengths and weaknesses

John Rekenthaler 10.05.2023
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Few investors neatly conform to a single description. As with heritage, most people have blended traits. (Although not all: my wife’s ancestry report reads "99.6% Eastern European.") But there’s no question that personalities affect investment behaviour. This article outlines the strengths and weaknesses of the three prevailing mindsets.


Investors in this group make their own decisions. They consume investment research neither for its counsel, nor to learn what others are doing, but instead as grist for the mill. Such people ignore the actions of the crowd. Should they see a line snaking around a block, they will not try to learn what they are missing. They will instead go on their way while pitying the line’s occupants.

Strengths include:

1) Buying Low

Loners are not the only investors who try to buy low. Stock mutual funds sometimes receive inflows after market declines because the overall marketplace believes that the dip presents a buying opportunity. Overall, though, loners are the likeliest investor type to sift among discounted securities, seeking bargains.

2) Early-Bird Gains

Besides receiving "dead cat bounces" from securities that are deeply depressed, loners may also profit from the opposite form of investment: highly expensive emerging-growth stocks. Before Tesla (TSLA) was mainstream, it was owned mainly by iconoclasts who discovered its story. The same holds for all winning startups.

Weaknesses include:

1) Self-Delusion

Unfortunately, not all that glitters is gold. For each dollar they stashed in Tesla or bitcoin, loners squandered thousands on investment dreams that never materialised. Sometimes wisdom does in fact lurk within the crowd. Loners constantly face the possibility their "insight" is instead self-delusion – the mistaken impression they see what others missed.

2) Bear Traps

A related problem is bear traps. This error has happily become less frequent, because market timing has become unpopular, but loners nevertheless tend to exit the stock market believing they have identified an upcoming bear. (A little knowledge can be a dangerous thing.) Once out of equities, they have trouble getting back in, because doing so before stock prices collapse would be a tacit admission of failure. Loners do not always benefit from having large egos.


More common than loners are followers, who derive comfort from crowds. Rather than walk past lines, they join them. Followers are strongly influenced by recommendations – from researchers, the media, friends and family, and internet boards. They seek investment allies.

Strengths include:

1) Staying Informed

Followers listen to others. Doing so helps to keep them knowledgeable about investments, thereby reducing the chance of an unpleasant surprise. As with inflation, which causes the most damage when it is unanticipated, unforeseen investment losses carry the sharpest sting. Followers who listen to both sides of the investment debates which, it must be confessed, does not always occur – are well prepared for bad news.

2) Trading Opportunities

By the time followers learn of an investment possibility, the loners have already found it. Word takes time to spread. Astute followers, however, may still reap ample profits by arriving before the rest of the marketplace. Discovering Tesla in winter 2020 was too late. But buying the stock two years before, when it was well-known but not yet the investment rage, would have been a splendid trade.

Weaknesses include:

1) Tail Chasing

A fine line separates being guided by the collective from being controlled by it. Those who appropriately use investment information, by applying common sense and at least a modicum of their own judgments, can prosper. Not so those who become bewildered by the investment gossip, turned this way and that, like dogs distracted by a fluffle of rabbits. Such is the constant danger for followers.

2) Mob Mentality

Followers are the most prone to being harmed by their emotions. As anybody who has participated in internet forums can attest, chat groups can quickly become mobs. (Whenever I receive an openly-insulting email, I know that my column has been posted on a Reddit board.) Investors may benefit from hearing additional views, but rarely will they succeed by sharing others’ emotions.


Most investors are zombies. The less they know about their portfolios, the happier they are. Consequently, they tune out the noise. Back in the day, that meant owning a portfolio that had been assembled by a stockbroker, and then leaving future decisions in the broker’s hands. These days, zombies are typically 401(k) participants or index-fund proponents. Either way, they stand aside.

Strengths include:

1) Investment Discipline

This one is obvious. To the extent that investment success comes from staying the course – a hoary cliché, but not without truth – zombies are perfectly situated. They possess neither the faith to make their own adjustments, nor the interest to copy other investors'. Their portfolios therefore tend to remain unchanged.

2) Emotional Control

In the 1990s, many investment experts speculated that when the long-awaited bear market finally arrived, 401(k) participants would be the first to sell, given their inexperience. They were instead the last. During the technology stock crash of 2000-02, 401(k) assets were more stable than either retail investors’ taxable accounts, or the portfolios run by professional managers. There is an advantage to lacking an investment brain.

Weaknesses include:

1) Missing Out

Although zombies will neither become ensnared by bear traps nor chase their performance tails, neither will they spot investment opportunities. To return to our previous example, some people bought Tesla before the company joined the S&P 500 in late 2020. They might have been loners, or they might have been among the earlier followers. But they assuredly were not zombies.

2) Structural Changes

Over the long haul, markets are very stable. Roughly speaking, bond yields increased for 30 years, from 1950 through 1980, before subsiding over the next three decades. That made for one inflection point during the Depression generation’s investment lifetime. The long-run performance of equities has been equally predictable. Thus, structural changes rarely leave zombies behind. When such shifts do occur, though, zombies are the last to know.

Wrapping Up

My investment type can best be described as "artificial zombie." That is, while I am a loner by nature, I have learned through experience the difficulty of outguessing the crowd. Thus, I behave like a zombie, by making few trades and distancing myself emotionally, although of course I am much too informed to be among that breed.

And you?

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About Author

John Rekenthaler  is vice president of research for Morningstar.

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