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Herd instinct in finance is the phenomenon where investors follow what they perceive other investors are doing, rather than their own analysis. In other words, An investor exhibiting herd instinct will gravitate toward the same or similar investments based almost solely on the fact that many others are buying the securities.

Herd instinct is a mentality that is distinguished by a lack of individual decision making or introspection, causing people to think and behave in similar fashion to those around them. Herd instinct is also known as herding, has a history of starting large, unfounded market rallies and self-offs that are often based on a lack of fundamental support to justify either. Herd instinct is a significant driver of asset bubbles in financial markets.

The dotcom bubble of the late 1990s and early 2000s is a prime example of the ramification of herd instinct in the growth and subsequent bursting of that industry's bubble. By nature human being want to be part of a community of people with shared cultured and socioeconomic norms. Nevertheless, people still cherish their own welfare. Investors can occasionally be induced into following the herd, whether through buying at the top of a market rally or jumping off the ship in a market sell-off. Behavioral finance theory attributes this conduct to the natural human tendency to be influenced by societal influences that trigger the fear of being alone or the fear of missing out.