1. No investment strategy.

From the outset, each investor should form an investment strategy that serves as a framework to guide future decisions. A well-planned strategy takes into account several important factors, including time horizon, risk tolerance, amount of investable assets, and planned future contributions. What do you want to achieve and when do you need to achieve it?

2. Invest in individual stocks instead of a diversified portfolio of securities.

Investing in an individual stock increases risk vs. Invest in an already diversified portfolio. Investors should maintain a broadly diversified portfolio that incorporates different asset classes and investment styles. The lack of diversification leaves people vulnerable to fluctuations in a particular security or sector. Also, don’t confuse stock diversification with portfolio diversification. You may own several stocks, but upon closer examination, discover that they are invested in similar industries and even the same individual stocks. There is no guarantee that a diversified portfolio will outperform or outperform a non-diversified portfolio. Diversification does not ensure a profit or protect against market losses.

3. Buy high and sell low

The fundamental principle of investing is to buy low and sell high. So why do so many investors get that backwards? The main reason is the “pursuit of performance”. Too many people invest in the asset class or type of asset that did well last year or two, assuming that because it seems to have done well in the past, it should do well in the future. That is absolutely a false assumption. The classic buy high/sell low investor profile is someone who has a long-term investment strategy, but lacks the tenacity to stick with it. The flip side of the buy-high-sell-low mistake can be just as costly. Too many investors are reluctant to sell a stock until they recoup their losses. Your ego refuses to admit the mistake of buying an investment at a high price. Smart investors realize that may never happen and cut their losses. Keep in mind that not all investments will increase in value, and even professional investors have a hard time beating the S&P 500 Index in any given year. It might be smart to have a stop loss order on a stock. It is much better to take the loss and redeploy assets towards a more promising investment.

4. Unrealistic expectations

As we saw during the recent bubble, investors can periodically exhibit a lack of patience that leads to excessive risk-taking. It is important to take a long-term view of investing and not allow external factors to cloud your actions and cause you to make a sudden and significant change in strategy. Comparing your portfolio’s performance against relevant benchmark indices can help a person develop realistic expectations. According to Ibbotson Associates, the compound annual return on common stock between 1926 and 2001 was 10.7% before taxes and inflation and 4.7% after taxes and inflation. Long-term bond returns over the same period were 5.3% before taxes and inflation and 0.6% after taxes and inflation. Expecting returns of 20-25% per year will leave the investor disappointed.

5. Emotion trumps rational judgment

People hate losing more than they like winning. This fear of regret causes investors to hold onto losers too long and sell winners too soon. Investors tend to hold on to losing investments hoping they’ll come back, rather than taking advantage of tax breaks. The opposite is true with winning stocks. Fearing a recession and wanting to lock in profits, investors will sell stocks too soon and miss out on potential future gains.

6. Market timing

Market timing is not something for the individual. The basic idea is to buy at a fixed price at the end of the day and then sell on the next trading day (assuming the price goes up). For the individual investor, this practice rarely makes sense for two reasons: first, profits are eaten up by fees; Second, the profits are fractions of cents, so few individual investors have the cash to make these transactions worthwhile. What to do instead: In short, don’t do it.

7. Procrastination.

Waiting for the right time can ruin your results for a lifetime. Procrastination takes many forms. You don’t start saving for retirement until you’re almost on top of yourself. You “know” to review your investments, but other things always seem more pressing. You think you’ll catch up later when the market is better, when you make more money, when you have more time. And therein lies the irony, because the longer you wait, the less time you have. Every day you delay is a day of opportunity that you can never get back.

8.Trusted institutions

It can be a mistake to rely solely on a broker or brokerage firm, an insurance agent, or your banker to tell you what is in your best financial interest. The same is often the case with government agencies, but that’s a whole different topic.

9. Demand perfection to be satisfied

We’ve all met people whose attitude is that nothing is good enough for them. People who can’t stand having anything but “the best” are rarely successful at investing. In fact, there will always be something that works better than what you have. If you have one stock that beats all the others this month, it’s virtually guaranteed that someone else will be ahead of yours next month. Perfectionists often jump from one thing to the next, chasing an elusive performance. But in real life, you get a risk premium only if you stay the course. And if you demand perfect investments, you will never stay the course.

10. Accept investment advice and referrals from hobbyists

If you were seriously ill, I expect you to see a nurse or doctor, not someone on the street who has an opinion on what to do. And I hope you’ll treat your life savings and financial future with the same care that you would treat your health. However, too many people make big financial decisions based on things they hear. “I heard this advice.” I know someone in this company. “I have an inside source on this new product.” “My broker is making me a lot of money.” The lure of the hot tip is almost irresistible to some investors eager to find a shortcut to wealth. Unfortunately, many investors have to learn the hard way that there are no reliable shortcuts.

11. Letting emotions, especially greed and fear, drive investment decisions

I believe the two most powerful forces driving Wall Street trends are greed and fear. Think about these two emotions the next time you hear a radio or television commentator explain what is happening in the stock market. You will hear fear and greed over and over again. There is fear of rising interest rates, fear of inflation, fear of falling profits. Whatever, someone is afraid of it. Fear is the reason so many investors abandon carefully planned investments when things look bleak, and since everyone seems to be selling at the same time, prices drop. That, in turn, reduces profits or increases losses. Greed blinds investors, making them forget what they know. In late 1999 and early 2000, greed led many inexperienced investors, and some experienced ones, to fill their portfolios with high-flying technology stocks that had just had a bumper year. In the spring of 2000, technology stocks, especially the more aggressive ones, crashed without warning, leaving many of these greedy investors wondering what had hit them. Investors obviously want to make money. But this legitimate desire turns into greed when he runs amok. Similarly, investors should obviously want to avoid losing their money. However, when a healthy respect for bear markets leads to panic selling, caution backfires.

12. Focusing on the wrong things

It is generally accepted that asset allocation, the choice of which assets to invest in, accounts for a large majority of investment returns. That leaves less than a few percent to pick the best stocks. But most investors focus at least 95 percent of their attention on choosing funds and stocks. Typically, your energy would be better spent on asset allocation. Some investors also focus on small parts of their portfolios rather than the whole package. They may become obsessed with some small investment that seems stubbornly refusing to do its part. Occasionally an enraged investor will derail an entire strategy because of what happens to some small component of it.

13. Need proof before making a decision

The last delay tactic for those who are not ready to make an investment is to request one more piece of information or evidence. You can get proof, but no proof. You can prove what happened in the past. But there is no way to prove anything about the future except to wait until it happens. There are two antecedents for any investment. The first one just finished, and it includes the whole story. It can tell you the range of returns and risks that it is reasonable to expect. But it can’t tell you anything about the future. The second history starts at the time you invest. It is the only history that matters to you, and it may or may not bear any resemblance to the history of history. The only thing you can be sure of about the future is that it will not look like the past. That’s why smart investors diversify beyond what seems safe at any given time. To be a successful and happy investor, you must somehow learn to live with the ambiguity of an uncertain future.