Here are the investment mistakes secrets you can avoid. It is not about more money, it is not a higher IQ or excellent timing, it’s about your thoughts.
Just as we are wired – our natural tendency is to want to have more information, to look for patterns, compare alternatives and even to flee to safety. However precisely, these properties are also our biggest burden as an investor. In other words, your brain is to be blame if you make all those investment mistakes. To prove that we mind, most of us have one time or the other also made the same mistakes.
Two characteristics that you have to possess to become a big fish.
The secret ingredients to successful investing regardless of education, investment style or favourite sport are time and temperament.
- Time: An investment in shares requires a time horizon of at least five years. Just imagine that you send some of your money in holidays while another part takes care of the short-term tasks such as the payment of repair cost of the car, a house or your child fee. But even if it sounds like a hit, it can be hard to be a long-term investor in a short-term oriented world – which brings us to the second ingredient that makes an investor great.
- Temperament: Successful investors stay calm and keep a cool head when everyone breaks out around them in panic. This attitude differs for investors that outperform the market continuously from those who are lucky enough only for a certain time. In order to develop an even temperament, one that focuses on the long term and not short-term results which ignores the masses in favour of a deliberate strategy – Build resistances against the emotional switch that lead to bad investment decisions.
Spread your risk
To be able to sleep peacefully, you need a solid plan for the allocation of your investment that means, a portfolio with a series of investments that do not always move all in the same direction. You have to diversify.
Stay strong, think long term
For Fools the investment success is not measured in minutes, months or a year or two. We will choose our investments due to their long-term potential. So Resist the urge to constantly act. Meet your decisions with a cool head after you have digested new information. Sometimes the best course of action is not an action.
Use your time wisely and check your investment philosophy and your investment process. Take for example, an investment that will not let you sleep. Write down why you made it at all. Ask yourself if anything fundamental has changed. This exercise points out that short-term fluctuations in the stock market have little importance for long-term savings and wealth accumulation.