Tags: Housel | investment | mistakes | stocks

Motley Fool's Housel: 3 Investment Mistakes to Avoid

By    |   Monday, 15 September 2014 03:03 PM

Most of us try to be disciplined in our investing.

"Yet markets are unpredictable, and people are emotional," Motley Fool columnist Morgan Housel writes in The Wall Street Journal.

"Mixing the two [creates] misbehavior and regret, as the temptation to buy stocks when they're high and sell when they're low overwhelms common sense."

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He identifies three common investment mistakes.
  • "Incorrectly predicting your future emotions. Too many investors are confident they will be greedy when others are fearful. None assume they will be the fearful ones, even though somebody has to be, by definition," Housel says.
  • "Failing to realize how common volatility is." One important point to remember is that market corrections are common. While the S&P 500 has now gone 35 months without a 10 percent decline, in the past such a move came every 18 months on average.
  • "Trying to forecast what stocks will do next." Former Federal Reserve Chairman Alan Greenspan has pointed out, "We really can't forecast all that well, and yet we pretend that we can."
"You have no control over what the market will do next. You have complete control over how you react to whatever it does," Housel states.

Meanwhile, CNNMoney lists four common investment mistakes.
  • Failing to invest in stocks. They offer the best long-term returns of standard assets, yet many Americans are afraid of them after their 2008-09 plunge.
  • Investing in riskier assets. With interest rates low, many investors are venturing out on the risk curve.
  • Short-term thinking. Investors often purchase assets based on past returns rather than future potential.
  • Forgetting inflation. At some point inflation will rise. Many investors aren't ready for that.
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Most of us try to be disciplined in our investing.
Housel, investment, mistakes, stocks
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2014-03-15
Monday, 15 September 2014 03:03 PM
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