Avoid These Mistakes and Become a More Successful Investor – Here’s How

Some investors find that they have the time, energy, and objectivity to act successfully on their own but for many it would make more sense to turn the job over to an expert and enjoy life. Others might just want some help and that is just what this article does. Read on!

(This post has been edited and abridged by Lorimer Wilson, Managing Editor of munKNEE.com, for the sake of clarity and brevity to provide a fast and easy read.)

According to Jeff Miller investors often make the following investing errors that impede their becoming successful investors:

1. Trying to be traders
   • The successful investment strategy differs markedly from trading.  It is especially important to establish good, long-term positions. That being said, taking a long-term perspective is easier said than done.
     • Most individual investors seriously underperform long-term results by selling low and buying high.  Most successful professionals, of course, do the opposite.
     • Even successful years have significant drawdowns.  15% is not unusual.  The investor needs to expect this.  If it feels stressful, then the asset allocation is wrong.
2. Thinking they are experts on world events
   • Many investors confuse their politics with their investments but they need to be “politically agnostic” in their observations on current events rather than investing based on their personal opinions.
3. Waiting until there are, supposedly, no problems
   • This is the single most costly mistake. Investing requires balancing risk and reward, not waiting for complete safety.
4. Not managing risk effectively
   • Instead of reacting to news, the long-term investor should emphasize broad themes.
5. Attempting market timing
   • It is especially important to establish good, long-term positions. Short-term market timing is pure folly. There is no magic moment.
   • Resolving market worries is a process, not an event so, instead of guessing the next market move, take what the market is giving you.  You should not be a “buy and hold” investor, but instead engage in  active management.  Think about risk control rather than market timing.

Bottom Line

The biggest mistake that individual investors make is bad timing by following headlines.  Using data is a way to avoid that.