MISTAKE #4Letting Yourself Get in the Way
The most important quality for an investor is temperament, not intellect.
—Warren Buffett
Most people who get excited about investing dive into research, read market timing or stock pick letters, use online services, and watch financial news all the time. The idea is that the more they know, the better informed they will become, and the less likely they will be to make a mistake. It doesn't really work out this way. If you have a reasonable intelligence level and understand the basic principles of this book, you will likely outperform the great majority of investors. The key is not to mess things up. Unfortunately, there are plenty of ways to do just that. So far, we have examined strategies that are likely to do far more harm than good. But I have personally seen nothing cause more financial destruction than the emotionally driven mistakes investors make. The key is to recognize your behavioral biases so that you can knowingly protect yourself from making mistakes. Let's dive in.
Fear, Greed, and Herding
Fear has a greater grasp on human action than does the impressive weight of historical evidence.
—Jeremy Siegel
The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable.
—Warren Buffett
A typical year in the market (see Figure 4.1) …
Source: Warren Buffett, CEO ...
Get The 5 Mistakes Every Investor Makes and How to Avoid Them, 2nd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
