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What to know: Financial manias begin with an enticing prospect of wealth that draws in increasing numbers of people who believe they’ve unlocked a unique path to riches. As prices rise, confidence grows, feeding a sense of collective wisdom. Eventually, however, reality sets in; either prices peak or external triggers, like economic shifts or crises, prompt panic selling. A crash ensues, and people often blame others or circumstances rather than learning from their own misjudgments.

Key takeaways: Financial markets are often driven by collective emotions, but you can better navigate these cycles by studying past manias, questioning seemingly “too good to be true” trends, and focusing on real value. Ultimately, independent thinking, grounded analysis, and avoiding crowd mentality help offer you the best safeguards against falling for the next financial frenzy.