The No Taper Takeaway: Beware the Consensus

Wednesday was a stunner.

The Federal Reserve, under Chairman Ben Bernanke, confounded the so-called experts (and casual observers like me) by deciding to continue buying bonds at its current $85-billion-a-month pace.

The bond buys, as you surely know, are part of the Fed’s on-going stimulus policies, aimed at keeping the US economy growing by pumping money into the system and lowering interest rates.

(Read More: Taper Off! Fed Keeps Foot on the Easy Money Pedal)

It’s a controversial policy, and most on Wall Street expected the Fed to reign in its bond buys, or taper them, to the tune of $10 to $15 billion a month. The Fed had hinted as much earlier in the summer, though it left the timing and size of the taper unclear.

Well, the experts were wrong. Bernanke and company examined the economic data, pondered the possibility that Congress and the White House won’t come to accords on the budget or debt ceiling, and concluded that now is not the time to pull back.

To me, the key lesson for individual investors like you is this: always beware the consensus. When everybody starts believing one thing, it may be time for you to believe another – and go against the crowd.

(Watch: No Fed Taper: What Does It Mean for Your Money?)

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