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As a confessional and as a vicarious learning tool for myself and others, I wanted to try and create a list of some of the mental traps we fall into when investing.

Mine is my time horizon. I start with a long term focus picking a value stock with a great balance sheet, good earnings and growth prospects in a unfavourable sector of the market.

As time goes by, I see the stock decline, and I look at the overall market which looks like it is going down, and I start getting this feeling I should sell and buy it back when it gets cheaper. Every time I do this, I end up making a bad decision and losing money.

What psychological pitfals have you fallen for or narrowly avoided?
 

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We are overly cautious.

When a stock goes down we are happy so we don't have any problems with this. However, instead of deploying 40% of our capital we may only deploy 20%.

This is very apparent on the blog in my sig; in many years we hold too much cash. However, even with the anchor of too-much-cash we have managed to do quite well, but we could have done better.

We tried to buck this trend during the past downturn, deploying a more significant amount of capital.
 

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As a confessional and as a vicarious learning tool for myself and others, I wanted to try and create a list of some of the mental traps we fall into when investing.

Mine is my time horizon. I start with a long term focus picking a value stock with a great balance sheet, good earnings and growth prospects in a unfavourable sector of the market.

As time goes by, I see the stock decline, and I look at the overall market which looks like it is going down, and I start getting this feeling I should sell and buy it back when it gets cheaper. Every time I do this, I end up making a bad decision and losing money.

What psychological pitfals have you fallen for or narrowly avoided?
Max , I used to do the same as you , it requires real determination to use a buy and hold system , but it usually pays off in the end.
You must rebalance and take some profits along the way though , another thing I sometimes neglect to do , sometimes one doesn't want to sell a stock that looks like it is going sky high , but that is precisely the time to take your gains.
That is one of the reasons I began investing mainly in REIT's , they pay distributions so you have a good income stream even when prices are declining , in fact payout percentages actually increase as the prices drop , kind of like bonds , especially if you rebalance and buy more when prices are lower.
Investing for capital gains alone is more like speculating than investing , one should always have dividend paying companies in their portfolio , that's one of the mistakes I have corrected in my investing style over the years.
Another mistake I make is that I watch BNN way too much :eek: , it can be very depressing :confused: .
 

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Two main ones:
-When buying stocks, low price speculation (I know I should buy today because it's a fair buy, but what happens if I wait until tomorrow, will it sell cheaper than it did today?), fighting that urge to market time and speculate. If it's a good deal, if it's a great company selling at 10 times earnings, buy it now because anything can happen tomorrow, the stock market could take off and never return back until 10 years from now.
-Ignoring the stock market and focusing on business results rather than stock market results. seeing the stock price drop and fighting the feeling that I'd made a bad decision buying the stock. I remind myself, if the stock market closed for the next 5 years, would I still be happy I owning a piece of this business. Thinking of where this business will be in 5 years and the bargain price paid for it, and realizing the stock market shouldn't validate whether you'd picked it up at a fair price. The stock market does what it does, it's the guy sitting beside you, your business partner owning the same piece of stock, constantly quoting you at what price he'll buy or sell you out. Doesn't mean he knows what he's talking about.
 

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Do the opposite of what the "experts" say, lol. I am very new to investing so this means absolutely nothing. But I have been watching the markets for a for a while, I actually check out a site often that compiles quotes from market analysts on the market in general and particular stocks. If you go back 2-3 years, for the large majority of them, if you had done exactly opposite of what they said, you would be in great shape.
I guess my rule will be, never base my decisions on someone elses opinion.
 
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