I’m not a big fan of top 10 lists, but I highly recommend reading Meir Statman’s top 10 list of errors average investors make. Statman hits the ball out of the park. I can see my own tendencies in every one of the errors. I might go so far as to say that investors should reread this list just before making any trades.
Even easier than seeing your own errors is seeing these mistakes in other people’s behaviour. However, I try to avoid pointing them out to all but my closest friends and family. Few will thank you for criticism and only those closest to you will forgive you and maybe even thank you (much later).
That's a great article. I think that one of his errors - anger, is a tricky one. Yes, anger can cause mistakes, but it can also induce good decisions. In the case where a salesman lies, getting angry and leaving, vowing never to return, is the right decision.
ReplyDeleteWhen one ends up owning a fraudulent stock or investing with a fraudster, anger and selling/firing is an appropriate response. I suppose one can act appropriately without getting angry, but in these cases, anger doesn't harm you.
@Gene: I guess anger isn't so much an error in itself, but could cause us to make errors. If the anger causes a positive response, then as you say it isn't really an error. However, I can think of many examples where anger caused me to make a poor choice -- not in investing, but in other aspects of life.
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