As investors we’re often told what to do.
One of my favourite columnist Morgan Housel at Fool.com suggested 25 things to avoid doing.
He said that when you come across any one of a list of 25 things, you should drop everything and run.
Here are some of the ones that resonated with me:
- Feelings of certainty. They invariably come just before big surprises.
- People who claim certainty. It’s the most potent way to trick someone.
- Risk-free returns. You’ll end up with return-free risk.
- People who have predicted 564 of the last two market crashes. And there are a lot of them.
- Putting 30 years worth of savings into something you spent seven minutes researching. You have no right to complain about losing money in an investment you put no effort into understanding.
- Extrapolating the recent past into the future. Things always change. If your forecast doesn’t, you’re doing it wrong.
- People who aren’t willing to change their minds. Including yourself. Especially yourself.
- Feeling smarter after the market goes up. You had nothing to do with it.
- Explanations of what were likely random events. This means almost every market move that takes place in time periods less than one year.
- Spending more time arguing why other investors are wrong than trying to figure out what you’re doing wrong.
- Impatience. It’s the fastest way to disappointment.
- Assuming investors who wear suits are smarter than you. Being a smart investor has little to do with education or job title and everything to do with behavioral traits.
- Assuming intelligence in one field translates to being a smart investor. I doubt there’s any correlation.
- Assuming that bad investments you made were the result of bad luck and good investments you made were all skill.
- Worrying about things you can’t control. Like what the Fed will do next, what the market will do next month, or whether earnings will beat expectations.
Read the rest of the list here.
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