You often hear about what it takes to be a successful investor. For the most part, what you read is great advice, but it leaves you thinking, "well that’s interesting, but it's also common sense." However, when it comes to implementation, many people make the same mistakes over and over. It’s not entirely their fault, and most can blame emotions for getting in the way. These emotions are strong and surface from a variety of factors, such as our upbringing, what we hear in the news, and our past investment experience.
In this iThrive Idea™, we thought it would be helpful to take a different approach and list the top 5 investor mistakes. We hope reading this will help you control emotions and avoid common investment pitfalls.
- Market timing – It has been proven countless times. Even if you get out at the right time, you have to be right a second time and get back in before the market rebounds.
- Investing without a plan – Without a strategy (in writing) around when you’ll retire, how much you’ll spend in retirement, and how much you are going to save between now and then, you are flying blind with no purpose.
- Making investment decisions based on the news – Remember how the news and media industries are paid. They need viewership to get advertising, and unfortunately viewership is achieved by scaring you or promoting another get-rich-quick scheme. Don't get caught up in hysteria, good or bad.
- Emotional attachment – It is difficult for investors to sell, be it losers or winners. We hold on to losers waiting for the optimal time to get out. We also hold on to winners thinking it will continue forever. Successful investors think like machines by removing all emotional attachment and looking at the bigger picture.
- Building a collection of investments – We frequently run into portfolios that look more like a collection belonging on someone’s mantel than an cohesive investment plan. Think of investing like baking a cake. You need the right ingredients and the right amount to produce something that will taste good.
Avoid these five mistakes and you’ll be on your way to becoming a successful investor!