People are inclined to make irrational decisions, especially when it comes to their portfolio. Those irrational decisions are born out of bad investing behavior, and they can be costly. A recent Forbes article summed up the “Five W’s of Bad Investing Behavior”.
Winging it: as many as 70% of investors do not have a plan. Without a plan, there is no way of knowing when you are on track or off track.
Weighting the winners: chasing performance is not a long-term strategy. Loading up on today’s winners and unloading the ‘losers’ is not a solid plan.
Watching the markets intensely: They say information is power, but too much information can hurt your portfolio. Much of what comes out of the financial media is just noise. Turn it off.
Waffling between trading and investing: trading is about immediate results. Investing is about building your wealth over the long-term.
Worrying about your neighbors’ portfolio: keeping up with the Jones’ has no place in portfolio management. Focusing on what everyone else is doing is a great way to lose sight of your goals.
The five W’s are common mistakes, and they are part of human nature. But they can end up costing investors dearly.