CBS MoneyWatch columnist Larry Swedroe’s bedrock principles for investing success
Investment Mistakes Even Smart Investors Make and How to Avoid Them helps anyone from the novice investor to the professional money manager become a more informed investor—and ignore the kind of pervasive “conventional wisdom” that so often leads to financial loss.
Swedroe describes how behavioral mistakes and overconfidence can lead you to stray from proven investment principles, and he explains how to reverse these temptations and make the right investing decisions when it counts most.
Larry Swedroe is Principal and Director of Research at Buckingham Asset Management. He writes the popular blog “Wise Investing” at CBS MoneyWatch.com.
Table of contents
- Cover Page
- Investment Mistakes Even Smart Investors Make and How to Avoid Them
- Copyright Page
PART 1 Understanding and Controlling Human Behavior Is Important for Investment Success
- MISTAKE 1 Are You Overconfident of Your Skills?
- MISTAKE 2 Do You Project Recent Trends Indefinitely into the Future?
- MISTAKE 3 Do You Believe Events Are More Predictable After the Fact Than Before?
- MISTAKE 4 Do You Extrapolate from Small Samples and Trust Your Intuition?
- MISTAKE 5 Do You Let Your Ego Dominate the Decision-Making Process?
- MISTAKE 6 Do You Allow Yourself to Be Influenced by a Herd Mentality?
- MISTAKE 7 Do You Confuse Skill and Luck?
- MISTAKE 8 Do You Avoid Passive Investing Because You Sense a Loss of Control?
- MISTAKE 9 Do You Avoid Admitting Your Investment Mistakes?
- MISTAKE 10 Do You Pay Attention to the “Experts”?
- MISTAKE 11 Do You Let the Price Paid Affect Your Decision to Continue to Hold an Asset?
- MISTAKE 12 Are You Subject to the Fallacy of the “Hot Streak”?
- MISTAKE 13 Do You Confuse the Familiar with the Safe?
- MISTAKE 14 Do You Believe You Are Playing with the House’s Money?
- MISTAKE 15 Do You Let Friendships Influence Your Choice of Investment Advisors?
PART 2 Ignorance Is Not Bliss
- MISTAKE 16 Do You Fail to See the Poison Inside the Shiny Apple?
- MISTAKE 17 Do You Confuse Information with Knowledge?
- MISTAKE 18 Do You Believe Your Fortune Is in the Stars?
- MISTAKE 19 Do You Rely on Misleading Information?
- MISTAKE 20 Do You Only Consider the Operating Expense Ratio When Selecting a Mutual Fund?
- MISTAKE 21 Do You Fail to Consider the Costs of an Investment Strategy?
- MISTAKE 22 Do You Confuse Great Companies with High-Return Investments?
- MISTAKE 23 Do You Understand How the Price Paid Affects Returns?
- MISTAKE 24 Do You Believe More Heads Are Better Than One?
- MISTAKE 25 Do You Believe Active Managers Will Protect You from Bear Markets?
- MISTAKE 26 Do You Fail to Compare Your Funds with Proper Benchmarks?
- MISTAKE 27 Do You Focus on Pretax Returns?
- MISTAKE 28 Do You Rely on a Fund’s Descriptive Name When Making Purchase Decisions?
- MISTAKE 29 Do You Believe Active Management Is a Winner’s Game in Inefficient Markets?
- MISTAKE 30 Do You Fail to Understand the Tyranny of the Efficiency of the Market?
- MISTAKE 31 Do You Believe Hedge Fund Managers Deliver Superior Performance?
- MISTAKE 32 Are You Subject to the Money Illusion?
- MISTAKE 33 Do You Believe Demographics Are Destiny?
- MISTAKE 34 Do You Follow a Prudent Process When Choosing a Financial Advisory Firm?
PART 3 Mistakes Made When Planning an Investment Strategy
- MISTAKE 35 Do You Understand the Arithmetic of Active Management?
- MISTAKE 36 Do You Understand That Bear Markets Are a Necessary Evil?
- MISTAKE 37 Do You Treat the Highly Likely as Certain and the Highly Unlikely as Impossible?
- MISTAKE 38 Do You Take Risks Not Worth Taking?
- MISTAKE 39 Do You Confuse Before-the-Fact Strategy with After-the-Fact Outcome?
- MISTAKE 40 Do You Believe Stocks Are Risky Only If Your Horizon Is Short?
- MISTAKE 41 Do You Try to Succeed Even When Success Is Highly Unlikely?
- MISTAKE 42 Do You Understand the Importance of Saving Early in Life?
- MISTAKE 43 Do You Fail to Evaluate the Real Cost of an Expenditure?
- MISTAKE 44 Do You Believe Diversification Is the Right Strategy Only If the Investment Horizon Is Long?
- MISTAKE 45 Do You Believe That This Time It’s Different?
- MISTAKE 46 Do You Fail to Tax-Manage Your Portfolio Throughout the Year?
- MISTAKE 47 Do You Let Taxes Dominate Your Decisions?
- MISTAKE 48 Do You Confuse Speculating with Investing?
- MISTAKE 49 Do You Try to Time the Market?
- MISTAKE 50 Do You Rely on Market Gurus?
- MISTAKE 51 Do You Use Leverage to Try to Enhance Investment Returns?
- MISTAKE 52 Do You Understand That There Is Only One Way to Be a Buy-and-Hold Investor?
- MISTAKE 53 Do You Work with Commission-Based Advisors?
- MISTAKE 54 Do You Spend Too Much Time Managing Your Portfolio?
- MISTAKE 55 Do You Prepare Your Heirs?
- MISTAKE 56 Did You Begin Your Investment Journey without a Road Map?
- MISTAKE 57 Do You Understand the Nature of Risk?
PART 4 Mistakes Made When Developing a Portfolio
- MISTAKE 58 Do You Consider Investments in Isolation?
- MISTAKE 59 Do You Have Too Many Eggs in One Basket?
- MISTAKE 60 Do You Underestimate the Number of Stocks Needed to Build a Diversified Portfolio?
- MISTAKE 61 Do You Believe Diversification Is Determined by the Number of Securities Held?
- MISTAKE 62 Do You Believe Focused Funds Outperform?
- MISTAKE 63 Do You Understand That in Times of Crisis the Correlations of All Risky Assets Rise?
- MISTAKE 64 Do You Fail to Consider Your Labor Capital When Constructing Your Portfolio?
- MISTAKE 65 Do You Believe the Investment World Is Flat?
- MISTAKE 66 Do You Confuse Indexing with the Exclusive Use of an S&P 500 Fund?
- MISTAKE 67 Do You Consider Your Home as Your Exposure to Real Estate?
- MISTAKE 68 Do You Fail to See the Risk in High-Yield Investments?
- MISTAKE 69 Do You Purchase Products Meant to Be Sold, Not Bought?
- MISTAKE 70 Do You Chase the IPO Dream?
- MISTAKE 71 Do You Understand That You Can Be Too Conservative?
- MISTAKE 72 Is Your Withdrawal Assumption Rate in Retirement Too Aggressive?
- MISTAKE 73 Do You Hold Assets in the Wrong Location?
- MISTAKE 74 Do You Believe That All Passively Managed Funds Are Created Equal?
- MISTAKE 75 Do You Trust but Fail to Verify?
- MISTAKE 76 Do You Have a Plan B?
- MISTAKE 77 Do You Keep Repeating the Same Mistakes?
- ABOUT THE AUTHORS
- Title: Investment Mistakes Even Smart Investors Make and How to Avoid Them
- Release date: December 2011
- Publisher(s): McGraw-Hill
- ISBN: 9780071786836
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