If you do it right, investing can bring about a massive amount of success. But what makes an investor great at what he does? Well, in most cases it is not necessarily the innate ability to differentiate between great and not-so-great business opportunities, but rather the capacity to avoid making certain mistakes. Following, we would like to present you with a list we have compiled of the top pitfalls any investor should avoid.
Curious to see why your investments haven’t paid off until now? Make sure you’re not making one of the mistakes presented below. Let’s take a look at the countdown.
No. 5: Making decisions based on familiarity
The overwhelming majority of people will always choose an option that seems familiar to them, as opposed to venturing into the unknown. But for investors, such a judgment can rapidly lead to erroneous decisions. For example, an investor might choose a certain business opportunity simply because he or she has some connections to it or because it is similar to a past decision, despite any signs that such a move might not be recommended.
No. 4: Emotional attachment
Emotional attachment is natural, but when it occurs in a business setting, it can be potentially devastating. Once an investor acquires a certain property or venture, he or she will have the tendency to attach to it and over-value it, which can lead to misguided decisions and financial fiascos. A professional investor should always avoid getting attached to their investments and remain dispassionate throughout the process.
No. 3: Looking for confirmation
There’s nothing wrong with wanting to ensure that you are making the right choice, but when it comes to investing, always looking for confirmation can quickly become your downfall. So what does looking for confirmation entail? Well, if you’re only looking for information that validates your opinion or you surrounded yourself with people that have the same point of view, you’re looking for confirmation. Because you dismiss any information that might be contrary to what you believe to be the right choice, you can easily become biased and make the wrong decision.
No. 2: Trying to patch up a failed investment
Humans have an innate inability to accept that they have failed. This is why a vast majority of investors will still try to make something happen, even when it is beyond obvious that a certain investment is a complete failure. Investors try to convince themselves that they really haven’t made a bad choice and will end up putting even more money into a venture that wasn’t going to work from the get go. Instead of losing more money, try to admit that you haven’t exactly made the right choice and earn your money back through other investments.
No. 1: Taking past successes for granted
One major mistake investors often make is believing that, if something succeeded in the past, it will do so in the future. Nothing farther from the truth, at least when it comes to investments. The number one rule you should remember is that making decisions following a pattern that worked in the past is not going to guarantee you nothing. You’re only putting yourself up for a massive failure.
