12 Investor Mistakes

April 21, 2024

Warren Buffett has mentioned numerous times some common investor pitfalls.

Here's 12 of them:

1. Timing the Market

As the title suggests it is futile to try to predict or time the market.

2. Fixed on Your Purchasing Price

If you bought a great business at a good price don't be too fixated on the initial purchase price. It will prevent you from buying more stock even if the company is performing well.

3. Aggressive Growth Projections 

We all saw what happened in 2020/2021 in terms of uber optimistic future growth projections. Very few companies can actually sustain a very high growth rate so be aware of this.

4. Using a lot of Leverage

If you live modestly and save each month compound interest will do the trick. However, if you get greedy and use debt/leverage to try to make money quick you'll soon learn a painful lesson.

5. Missing the Forest for the Trees

Do research on a company, but do not get lost in the details of some insignificant aspect of the company. Generally, a good investment opportunity is relatively simple with obvious tailwinds. So do not lose sight of the bigger picture.

6. Jumping Over 7-Foot Bars

In investing, something do not need to be complicated for it to make you a lot of money. You don't have to invest in the latest IPO or an experimental biotech company. It is far better to invest in something you can reasonably understand.

7. Restricting Your Opportunities 

Retail investors should not restrict themselves to certain investment styles, asset classes or stocks in certain sectors. In fact, if you don't limit yourself, you have an edge over professional money managers who have to follow an investment mandate.

8. Staying Active all the Time 

You do not get paid to be more active. It can be frustrating but it's actually better to do less in investing and follow a patient approach. 

9. Diversifying too Much 

If you buy too many stocks your performance will mimic that of an ETF. 

10. Confirmation Bias 

This is quite a big problem among investors because investors like to seek out information that support their investment thesis. Before you buy a stock you should look into reasons not to own the company in order to obtain a more balanced perspective.

11. Following the Herd

If everyone is talking about owing a certain stock it is generally a warning signal. The best investors make investment decisions that goes against the 'herd'.

12. Omissions

The biggest investment regrets are usually the one's where you didn't act. 

These 12 mistakes are beautifully summarised by The Swedish Investor, see here:


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