Sunday, September 1

7 of the most common mistakes, investments

| By Mike Patton, Forbes

There is no computer program or individual making the right investment decisions all the time. Here are some common mistakes investors make.

Mistakes happen in life. This also applies to investments. With all there is historical data and experience that we have yet no computer program or single, get it equal all the time. This is because investing includes uncertainty. In addition the investment an emotional endeavor, especially, if the money was the product of years and years of hard work and discipline. In this article, we review some common mistakes investors make.

It is true that investments are part science and part art. For this reason, successful investing in General should contain elements of each. Decisions can bring disastrous results go to feel like decisions, which can represent a problem only from a computer program. Emotional decisions are often subject to prejudice. For example, can if investors buy a specific investment and it then rises, they believe they were sure apply, this would happen. However, rejects the investment, they can convince themselves that they had any idea, what could also happen.

This contradiction is because human behavior has a tendency to arrange our thoughts to fit the thesis of the moment. This is where "behavioral finance" enters the picture. Psychologists have identified a number of human inclinations to explain the inconsistent behavior patterns. The truth is, that contain good investment decisions elements of number crunching and human reason. And while it is important to recognize this, it is much easier said than done. Now we come to the error #2, owners lose one investment too long.

I've seen a few times over the years. The story goes like this. I bought an investment and lost it in value. Now it is around 20%. But when I bought it, I thought it was a good investment. So I'm pretty sure it will rest and if it breaks, I'm going to sell it. The truth is that she probably does not comply with. Why? Because if it comes back, she'll keep it, will believe that it will continue to increase, strengthen their original believe that it was a good investment decision. Here is the problem.

The individual would be there with loss to sell they forced to admit that she is a bad decision. And admit it is very difficult for some. In fact, it is sometimes the best your losses and move on. Now we look at bug #3, impatience.

Investment requires much patience. Vice versa which can be problematic hasty decisions in any effort. Most of us were trained by the company to expect "instant gratification." The truth is, life doesn't work that way, and nobody does invest. Investment requires patience. For example, there are an investment heavily to numerous cases in which for several years afterwards, before it turned and was a top performer.

That's not at all unusual. Therefore assuming that you quality selected who can play out an investment to maximize his return, what that you have, keep it through a full cycle of the Manager strategy itself. How long does it take for a complete cycle? This can be answered only in hindsight. It's the same in determining the end of the recession. It is usually several months after the fact, until we realize that a recession is actually finished.

Leave you when choosing an investment not only on past is. For example, if you buy a mutual fund it is important to assess how the Manager in a bad time in the markets, carried out such as 2008. My customers on average lost 16.25% that year.

There were a number of reasons why it's not worse, but here is the point. If you want an investment funds performance during a bad year look at, when you realize that she lost significantly less than similar funds, can be an indication, have strong risk management controls in place. The importance of this not overemphasize, especially the next downturn occurs.

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