A queue outside a shop is not only a sign of demand. It can create demand on its own. A passer-by sees a long line, assumes the line itself is evidence something worthwhile is inside, and joins. The queue grows for reasons that have nothing to do with what is actually being sold.
Markets run on a similar mechanism. A rising price is visible. It shows up in an account balance, in a headline, in a friend's screenshot of gains. None of that confirms the underlying business has actually improved. It only confirms the price has moved, and a moving price is what draws the next buyer in.
Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.Sir John Templeton
Confidence and buying interest tend to rise together with the price itself, not with any new information about value. Each new buyer's decision becomes evidence for the next one. It can look like many people independently confirming the same view. Often it is the same signal, the price going up, being read again and again.
This does not mean every price rise is empty enthusiasm. Some rallies do track a genuine improvement in a business or a market. The pattern above describes a tendency that shows up across crowds and across market cycles, not a verdict on any specific rally happening right now.
So why does a careful, sensible person end up buying near the top? Rarely through carelessness. Three forces build as a price rises, and they reach their strongest at the same moment.
Gains start to feel like proof of skill.
After a run of rising prices, it is easy to credit good judgement rather than a rising market. Each win makes the next decision feel safer, and recent gains begin to look like a guide to future ones. Confidence is often highest exactly when the room for disappointment is largest.
Going with everyone else feels like the safe choice.
When friends, colleagues and headlines all point the same way, standing apart feels reckless. Being wrong alongside everyone else is far more comfortable than being wrong alone, so the crowd's view quietly takes the place of independent judgement.
Watching others gain can hurt more than losing.
Seeing other people profit from a rise you sat out stings in a way that is hard to ignore. The urge to make that feeling stop pulls people in late, usually after much of the rise has already happened.
None of these forces is foolish on its own. Confidence after success, trust in what others are doing and regret at missing out are ordinary human responses that serve people well in plenty of everyday situations. The problem is timing. All three are at their most persuasive when the price has risen furthest, which is exactly when the most is already assumed and the least room is left for things to go wrong.
That is the real answer to the title. Investors rarely buy at the top because they ignore the evidence. They buy there because, at the top, the evidence they can feel has never been more convincing.
In late 2021 I bought shares in Enphase Energy, a US maker of solar equipment, at around $220 to $240 each. The story was everywhere. Governments were pushing hard on clean energy, an energy shortage was dominating the headlines, and the investors I followed online were talking about solar as one of the defining trades of the decade. I had seen the chart. The shares had already risen around tenfold since early 2020, but I did not read that as a warning. If anything, the climb felt like proof the story was right.
At the time, it did not feel late. It only looked late afterwards. The narrative, the people I was listening to and the rising price were all saying the same thing, and that is exactly the combination this article describes.
Buying near the top does not end with the purchase. Because I still believed I was right, every fall looked like a chance to buy more at a better price, and I kept averaging down for four years. The loss hurt, but the bigger cost never appears on a statement: money tied up in one belief that could have been growing somewhere else the whole time.
I was not careless. I was carried. When a story, the crowd and the price all agree, the question worth asking is whether I am buying the business or the feeling.
I paid for that lesson with my own money, so you do not have to. Spotting the pattern in someone else's mistake is far cheaper than learning it with yours.
Be fearful when others are greedy and greedy when others are fearful.Warren Buffett
It is simple to say and hard to do, for exactly the reasons above. Acting against the crowd means sitting with the discomfort all three forces create, and it is no guarantee of being right. Sometimes the crowd is right, and a price that looks stretched keeps rising for years. The point is not to bet against every rally, but to notice when a decision is being driven by the feeling rather than by the business.
A rising price manufactures its own supporting evidence.
Gains that show up in an account balance feel like proof a decision was right, even before anything about the underlying business has been confirmed.
Buying because others are buying has a name: herd behaviour.
It is not a verdict on any one person's judgement. It is what a crowd looks like when many people react to the same visible price move rather than to separate evidence.
Confidence tends to peak exactly when a price has moved furthest from where the cycle began.
That describes the shape of the pattern. It is not a signal that says a specific price has stopped rising today.
There is a measurable cost to this pattern, though buying near the top is only part of it. Studies of fund investors compare the return a fund earns with the return its investors actually receive, once the timing of every purchase and sale is counted. The difference is often called the behaviour gap.
In short: a rising price feels like evidence, but it is only evidence that the price has risen.
Each new buyer reads the move as confirmation, and their buying pushes the price further, drawing in the next. Confidence, the pull of the crowd and the fear of missing out all grow with the price, so buying tends to be loudest near the top of a cycle and quietest near the bottom, the opposite of when prices are most attractive.
So next time something you own, or something everyone is talking about, has risen sharply, you can ask: has anything about the business actually changed, or only the price? Am I buying because of what I know, or because others are buying? Those questions won't tell you whether the top has arrived. They make sure your decision rests on more than a moving price.